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.'

Which means for our asset as example:- Compared with the benchmark SPY (68.6%) in the period of the last 5 years, the total return of 110.1% of Volatility less than 10% is larger, thus better.
- During the last 3 years, the total return, or performance is 38.5%, which is lower, thus worse than the value of 51% from the benchmark.

'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:- Compared with the benchmark SPY (11%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 16% of Volatility less than 10% is larger, thus better.
- During the last 3 years, the annual return (CAGR) is 11.5%, which is lower, thus worse than the value of 14.8% from the benchmark.

'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:- The 30 days standard deviation over 5 years of Volatility less than 10% is 8.1%, which is smaller, thus better compared to the benchmark SPY (13.5%) in the same period.
- Looking at 30 days standard deviation in of 7.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.8%).

'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.'

Using this definition on our asset we see for example:- Looking at the downside deviation of 9.1% in the last 5 years of Volatility less than 10%, we see it is relatively smaller, thus better in comparison to the benchmark SPY (14.9%)
- During the last 3 years, the downside deviation is 8.8%, which is smaller, thus better than the value of 14.7% from the benchmark.

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Applying this definition to our asset in some examples:- Looking at the ratio of return and volatility (Sharpe) of 1.67 in the last 5 years of Volatility less than 10%, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.63)
- During the last 3 years, the risk / return profile (Sharpe) is 1.22, which is larger, thus better than the value of 0.96 from the benchmark.

'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.'

Which means for our asset as example:- Looking at the ratio of annual return and downside deviation of 1.48 in the last 5 years of Volatility less than 10%, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.57)
- Looking at ratio of annual return and downside deviation in of 1.02 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.83).

'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:- Compared with the benchmark SPY (3.99 ) in the period of the last 5 years, the Downside risk index of 1.94 of Volatility less than 10% is lower, thus better.
- During the last 3 years, the Downside risk index is 2.18 , which is lower, thus better than the value of 4.1 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.'

Which means for our asset as example:- The maximum reduction from previous high over 5 years of Volatility less than 10% is -6.4 days, which is higher, thus better compared to the benchmark SPY (-19.3 days) in the same period.
- During the last 3 years, the maximum DrawDown is -6.2 days, which is higher, thus better than the value of -19.3 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). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Using this definition on our asset we see for example:- The maximum time in days below previous high water mark over 5 years of Volatility less than 10% is 190 days, which is higher, thus worse compared to the benchmark SPY (187 days) in the same period.
- Looking at maximum time in days below previous high water mark in of 190 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (139 days).

'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.'

Which means for our asset as example:- Looking at the average days below previous high of 33 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 (42 days)
- During the last 3 years, the average days below previous high is 44 days, which is higher, thus worse than the value of 36 days from the benchmark.

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, 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.