The Dow 30 strategy is a good way to invest in the best of the Dow 30 blue chips while avoiding the old fashioned underperforming members of the Dow 30 index.

The strategy uses a risk-adjusted momentum algorithm to choose the top four Dow 30 stocks with a variable allocation to treasuries or gold to smooth the equity curve and provide crash protection in bear markets. The strategy combines well with our more conservative strategies, such as the Bond Rotation Strategy or BUG, or with one of our non-U.S. equity strategies such as World Top 4, to form a well balanced portfolio.

The performance of the Dow 30 strategy is quite similar to the simpler US Market Strategy, however in volatile markets like this year, the stock picking Dow 30 outperformed. Notably, the February drawdown was only half of the US Market Strategy as the Dow Strategy excludes high volatility stocks.

'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.'

Which means for our asset as example:- Looking at the total return of 85.9% in the last 5 years of Dow 30 Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (77.1%)
- Compared with DIA (58.1%) in the period of the last 3 years, the total return, or performance of 32.3% is lower, thus worse.

'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 DIA (12.1%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 13.2% of Dow 30 Strategy is higher, thus better.
- Looking at compounded annual growth rate (CAGR) in of 9.8% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to DIA (16.6%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (13.6%) in the period of the last 5 years, the volatility of 8.8% of Dow 30 Strategy is lower, thus better.
- During the last 3 years, the historical 30 days volatility is 8.5%, which is lower, thus better than the value of 13.1% 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 risk over 5 years of Dow 30 Strategy is 9.8%, which is lower, thus better compared to the benchmark DIA (15.1%) in the same period.
- During the last 3 years, the downside risk is 9.9%, which is smaller, thus better than the value of 15.1% 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark DIA (0.71) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.22 of Dow 30 Strategy is higher, thus better.
- Compared with DIA (1.07) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.86 is lower, thus worse.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.64) in the period of the last 5 years, the downside risk / excess return profile of 1.09 of Dow 30 Strategy is larger, thus better.
- During the last 3 years, the excess return divided by the downside deviation is 0.74, which is lower, thus worse than the value of 0.93 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.'

Applying this definition to our asset in some examples:- The Ulcer Index over 5 years of Dow 30 Strategy is 3.49 , which is lower, thus better compared to the benchmark DIA (4.26 ) in the same period.
- Compared with DIA (4.23 ) in the period of the last 3 years, the Ulcer Index of 3.98 is lower, thus better.

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:- Looking at the maximum drop from peak to valley of -12.7 days in the last 5 years of Dow 30 Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (-18.1 days)
- During the last 3 years, the maximum reduction from previous high is -12.7 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.'

Applying this definition to our asset in some examples:- Looking at the maximum days below previous high of 191 days in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (227 days)
- Looking at maximum time in days below previous high water mark in of 191 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to DIA (161 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.'

Applying this definition to our asset in some examples:- The average days below previous high over 5 years of Dow 30 Strategy is 39 days, which is lower, thus better compared to the benchmark DIA (54 days) in the same period.
- Compared with DIA (45 days) in the period of the last 3 years, the average days under water of 45 days is greater, thus worse.

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 Dow 30 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.