This portfolio has been optimized for achieving the highest possible return while limiting the maximum Drawdown, that is the highest drop from peak to valley over the analyzed period, to 10%. As a reference, the maximum experienced drawdown of the iShares 20+ Year Treasury Bond ETF (TLT) over the same period has been 27%, while the SPDR S&P 500 (SPY) experienced a drop of 55%.

As such it is a moderate Portfolio suited for investors with a limited risk tolerance and moderate growth expectations.

Please note that the Maximum DrawDown refers to a single event, for analyzing the risk of losses you should also consider other related metrics like the maximum and average duration and the Ulcer Ratio. A more reliable measure for the downside risk of an asset over a period of time is the Downside Deviation or Volatility.

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:- The total return, or increase in value over 5 years of Max Drawdown less than 10% is 193.1%, which is greater, thus better compared to the benchmark SPY (71.4%) in the same period.
- Compared with SPY (47.3%) in the period of the last 3 years, the total return, or performance of 86.7% is larger, thus better.

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:- The annual performance (CAGR) over 5 years of Max Drawdown less than 10% is 24%, which is larger, thus better compared to the benchmark SPY (11.4%) in the same period.
- During the last 3 years, the annual return (CAGR) is 23.2%, which is higher, thus better than the value of 13.8% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (13.2%) in the period of the last 5 years, the 30 days standard deviation of 11.1% of Max Drawdown less than 10% is lower, thus better.
- Looking at 30 days standard deviation in of 10.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to SPY (12.4%).

'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:- Compared with the benchmark SPY (14.5%) in the period of the last 5 years, the downside risk of 12.4% of Max Drawdown less than 10% is lower, thus better.
- During the last 3 years, the downside risk is 11.5%, which is lower, thus better than the value of 14.1% 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.'

Using this definition on our asset we see for example:- Looking at the Sharpe Ratio of 1.94 in the last 5 years of Max Drawdown less than 10%, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.67)
- Looking at risk / return profile (Sharpe) in of 2.02 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.91).

'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 downside risk / excess return profile of 1.74 in the last 5 years of Max Drawdown less than 10%, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.61)
- Looking at downside risk / excess return profile in of 1.8 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.8).

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Applying this definition to our asset in some examples:- The Ulcer Ratio over 5 years of Max Drawdown less than 10% is 2.08 , which is lower, thus worse compared to the benchmark SPY (3.95 ) in the same period.
- Compared with SPY (4.01 ) in the period of the last 3 years, the Downside risk index of 1.93 is lower, thus worse.

'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 SPY (-19.3 days) in the period of the last 5 years, the maximum drop from peak to valley of -8.1 days of Max Drawdown less than 10% is larger, thus better.
- During the last 3 years, the maximum DrawDown is -7 days, which is larger, thus better than the value of -19.3 days from the benchmark.

'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.'

Using this definition on our asset we see for example:- The maximum days under water over 5 years of Max Drawdown less than 10% is 94 days, which is smaller, thus better compared to the benchmark SPY (187 days) in the same period.
- Looking at maximum days under water in of 94 days in the period of the last 3 years, we see it is relatively lower, thus better 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (41 days) in the period of the last 5 years, the average days below previous high of 16 days of Max Drawdown less than 10% is smaller, thus better.
- Looking at average days under water in of 18 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (36 days).

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

Allocations and holdings shown below are delayed by one month. To see current trading allocations of Max Drawdown less than 10%, register now.

()

- "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
- Performance results of Max Drawdown 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.