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%)
- World Top 4 Strategy (WTOP4) (0% to 100%)
- Global Sector Rotation Strategy (GSRS) (0% to 100%)
- Global Market Rotation Strategy (GMRS) (0% to 100%)
- Maximum Yield Strategy (MYRS) (0% to 100%)
- NASDAQ 100 Strategy (NAS100) (0% to 100%)
- Leveraged Gold-Currency Strategy (GLD-USD) (0% to 100%)
- US Sector Rotation Strategy (USSECT) (0% to 100%)
- Leveraged Universal Investment Strategy (UISx3) (0% to 100%)
- US Market Strategy (USMarket) (0% to 100%)
- Dow 30 Strategy (DOW30) (0% to 100%)
- Universal Investment Strategy (UIS) (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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (71.7%) in the period of the last 5 years, the total return, or increase in value of 119.2% of Volatility less than 10% is higher, thus better.
- Looking at total return, or performance in of 47.7% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (45.2%).

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- The compounded annual growth rate (CAGR) over 5 years of Volatility less than 10% is 17%, which is larger, thus better compared to the benchmark SPY (11.4%) in the same period.
- Looking at annual performance (CAGR) in of 13.9% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (13.2%).

'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.'

Which means for our asset as example:- Looking at the historical 30 days volatility of 8.2% in the last 5 years of Volatility less than 10%, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.6%)
- During the last 3 years, the volatility is 7.7%, which is lower, thus better than the value of 12.9% from the benchmark.

'Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Applying this definition to our asset in some examples:- The downside deviation over 5 years of Volatility less than 10% is 9.2%, which is smaller, thus better compared to the benchmark SPY (14.9%) in the same period.
- Looking at downside risk in of 9% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (14.6%).

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:- The Sharpe Ratio over 5 years of Volatility less than 10% is 1.78, which is higher, thus better compared to the benchmark SPY (0.66) in the same period.
- Compared with SPY (0.83) in the period of the last 3 years, the risk / return profile (Sharpe) of 1.47 is higher, thus better.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Using this definition on our asset we see for example:- Looking at the ratio of annual return and downside deviation of 1.58 in the last 5 years of Volatility less than 10%, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.6)
- During the last 3 years, the ratio of annual return and downside deviation is 1.26, which is greater, thus better than the value of 0.74 from the benchmark.

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Applying this definition to our asset in some examples:- Looking at the Ulcer Index of 1.9 in the last 5 years of Volatility less than 10%, we see it is relatively smaller, thus better in comparison to the benchmark SPY (3.99 )
- Looking at Ulcer Index in of 2.12 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (4.1 ).

'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.'

Applying this definition to our asset in some examples:- The maximum reduction from previous high over 5 years of Volatility less than 10% is -6.4 days, which is greater, thus better compared to the benchmark SPY (-19.3 days) in the same period.
- Looking at maximum reduction from previous high in of -6.2 days in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (-19.3 days).

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:- The maximum time in days below previous high water mark over 5 years of Volatility less than 10% is 164 days, which is lower, thus better compared to the benchmark SPY (187 days) in the same period.
- During the last 3 years, the maximum time in days below previous high water mark is 164 days, which is larger, thus worse than the value of 139 days from the benchmark.

'The Average Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. 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.'

Applying this definition to our asset in some examples:- Looking at the average time in days below previous high water mark of 28 days in the last 5 years of Volatility less than 10%, we see it is relatively lower, thus better in comparison to the benchmark SPY (41 days)
- Looking at average days below previous high in of 38 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (35 days).

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