The Bond Rotation Strategy is one of our core investment strategies. It is appropriate for investors looking to collect bond dividends while pursuing growth by rotating between bond sectors. The strategy evaluates and allocates to the best performing bond ETFs including treasuries, TIPS, foreign, high-yield and convertible bonds. This is a good strategy if you are looking for a long-term bond investment with medium risk.

The strategy has been updated (as of May 1st, 2020) to allocate 40%-60% to our HEDGE sub-strategy. The statistics below reflect the updated model.

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:- The total return over 5 years of Bond ETF Rotation Strategy is 49.2%, which is higher, thus better compared to the benchmark AGG (1.4%) in the same period.
- Compared with AGG (-14.4%) in the period of the last 3 years, the total return, or performance of 18.8% is higher, 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.'

Using this definition on our asset we see for example:- The compounded annual growth rate (CAGR) over 5 years of Bond ETF Rotation Strategy is 8.3%, which is greater, thus better compared to the benchmark AGG (0.3%) in the same period.
- Compared with AGG (-5.1%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 5.9% 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:- Looking at the volatility of 8.7% in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively greater, thus worse in comparison to the benchmark AGG (6.3%)
- Compared with AGG (6.2%) in the period of the last 3 years, the historical 30 days volatility of 6.1% is lower, thus better.

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

Which means for our asset as example:- The downside risk over 5 years of Bond ETF Rotation Strategy is 6.5%, which is greater, thus worse compared to the benchmark AGG (4.7%) in the same period.
- Looking at downside volatility in of 4.1% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (4.5%).

'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.'

Which means for our asset as example:- Compared with the benchmark AGG (-0.36) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.68 of Bond ETF Rotation Strategy is greater, thus better.
- During the last 3 years, the risk / return profile (Sharpe) is 0.56, which is greater, thus better than the value of -1.22 from the benchmark.

'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.'

Which means for our asset as example:- Looking at the ratio of annual return and downside deviation of 0.9 in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (-0.48)
- Compared with AGG (-1.68) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.84 is larger, thus better.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (7.38 ) in the period of the last 5 years, the Ulcer Ratio of 2.99 of Bond ETF Rotation Strategy is lower, thus better.
- Compared with AGG (9.18 ) in the period of the last 3 years, the Ulcer Index of 2.2 is lower, thus better.

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:- Compared with the benchmark AGG (-18.4 days) in the period of the last 5 years, the maximum reduction from previous high of -21.4 days of Bond ETF Rotation Strategy is lower, thus worse.
- During the last 3 years, the maximum reduction from previous high is -5.2 days, which is higher, thus better than the value of -18.1 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.'

Which means for our asset as example:- Looking at the maximum time in days below previous high water mark of 217 days in the last 5 years of Bond ETF Rotation Strategy, we see it is relatively smaller, thus better in comparison to the benchmark AGG (788 days)
- During the last 3 years, the maximum days under water is 217 days, which is lower, thus better than the value of 684 days from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The average time in days below previous high water mark over 5 years of Bond ETF Rotation Strategy is 59 days, which is lower, thus better compared to the benchmark AGG (277 days) in the same period.
- Looking at average days below previous high in of 72 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to AGG (315 days).

Historical returns have been extended using synthetic data.
[Show Details]

Allocations and holdings shown below are delayed by one month.

Register now to get the current trading allocations.

- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of Bond ETF Rotation Strategy 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.