This portfolio has been optimized for achieving the highest possible return while limiting the historical volatility to 10% or less over the analyzed period with the involved assets. As a reference, the volatility limit of 10% is about two thirds of the volatility, or risk, of the SPDR S&P 500 (SPY).

As such it is a conservative Portfolio suited for risk adverse investors with moderate growth expectations.

Please note that this portfolio might use leveraged ETF and single stocks. Should these not be allowed in your retirement account please see our 401k and IRS compatible Conservative, Moderate, and Aggressive Risk Portfolios. Contact us for special requirements.

While this portfolio provides an optimized asset allocation based on historical returns, your investment objectives, risk profile and personal experience are important factors when deciding on the best investment vehicle for yourself. You can also use the Portfolio Builder or Portfolio Optimizer to construct your own personalized portfolio.

Assets and weight constraints used in the optimizer process:

- Bond ETF Rotation Strategy (BRS) (0% to 100%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 100%)
- Global Market Rotation Strategy (GMRS) (0% to 100%)
- Global Sector Rotation Strategy (GSRS) (0% to 100%)
- Maximum Yield Strategy (MYRS) (0% to 100%)
- Universal Investment Strategy (UIS) (0% to 100%)
- Universal Investment Strategy 2x Leverage (UISx2) (0% to 100%)
- US Market Strategy (USMarket) (0% to 100%)
- US Market Strategy 2x Leverage (USMx2) (0% to 100%)
- US Sector Rotation Strategy (USSECT) (0% to 100%)
- World Top 4 Strategy (WTOP4) (0% to 100%)

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- Looking at the total return of 108.1% in the last 5 years of Volatility less than 10%, we see it is relatively larger, thus better in comparison to the benchmark SPY (98.3%)
- Compared with SPY (27.2%) in the period of the last 3 years, the total return of 42.8% is greater, thus better.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:- Looking at the annual performance (CAGR) of 15.8% in the last 5 years of Volatility less than 10%, we see it is relatively higher, thus better in comparison to the benchmark SPY (14.7%)
- Compared with SPY (8.4%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 12.7% is larger, thus better.

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Using this definition on our asset we see for example:- The 30 days standard deviation over 5 years of Volatility less than 10% is 11.2%, which is smaller, thus better compared to the benchmark SPY (20.9%) in the same period.
- Looking at historical 30 days volatility in of 10% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (17.7%).

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Applying this definition to our asset in some examples:- The downside volatility over 5 years of Volatility less than 10% is 8.1%, which is lower, thus better compared to the benchmark SPY (14.9%) in the same period.
- During the last 3 years, the downside volatility is 7.1%, which is smaller, thus better than the value of 12.4% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.58) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.19 of Volatility less than 10% is greater, thus better.
- Looking at Sharpe Ratio in of 1.02 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.33).

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.82) in the period of the last 5 years, the downside risk / excess return profile of 1.64 of Volatility less than 10% is greater, thus better.
- During the last 3 years, the excess return divided by the downside deviation is 1.44, which is greater, thus better than the value of 0.47 from the benchmark.

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:- The Ulcer Ratio over 5 years of Volatility less than 10% is 3.08 , which is lower, thus better compared to the benchmark SPY (9.32 ) in the same period.
- During the last 3 years, the Downside risk index is 3.08 , which is smaller, thus better than the value of 10 from the benchmark.

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -16.9 days of Volatility less than 10% is greater, thus better.
- During the last 3 years, the maximum reduction from previous high is -10.6 days, which is higher, thus better than the value of -24.5 days from the benchmark.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs) in days.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (488 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 243 days of Volatility less than 10% is lower, thus better.
- Looking at maximum days under water in of 243 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (488 days).

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (123 days) in the period of the last 5 years, the average days under water of 42 days of Volatility less than 10% is smaller, thus better.
- Compared with SPY (177 days) in the period of the last 3 years, the average days below previous high of 56 days is lower, thus better.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Volatility less than 10% are hypothetical and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.