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, the stock picking Dow 30 can outperformed the Dow 30 index.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (48.2%) in the period of the last 5 years, the total return, or increase in value of 71.4% of Dow 30 Strategy is greater, thus better.
- Looking at total return, or performance in of 38% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (37.6%).

'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:- Looking at the compounded annual growth rate (CAGR) of 11.4% in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (8.2%)
- During the last 3 years, the annual return (CAGR) is 11.4%, which is higher, thus better than the value of 11.2% 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.'

Using this definition on our asset we see for example:- Looking at the historical 30 days volatility of 8.8% in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (21.3%)
- Looking at volatility in of 7.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (16.8%).

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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:- The downside volatility over 5 years of Dow 30 Strategy is 6.2%, which is lower, thus better compared to the benchmark DIA (15.4%) in the same period.
- Looking at downside volatility in of 5.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (12%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.27) in the period of the last 5 years, the Sharpe Ratio of 1.01 of Dow 30 Strategy is larger, thus better.
- During the last 3 years, the Sharpe Ratio is 1.12, which is greater, thus better than the value of 0.52 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.'

Applying this definition to our asset in some examples:- The downside risk / excess return profile over 5 years of Dow 30 Strategy is 1.45, which is higher, thus better compared to the benchmark DIA (0.37) in the same period.
- Looking at ratio of annual return and downside deviation in of 1.63 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (0.73).

'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 Dow 30 Strategy is 2.45 , which is lower, thus better compared to the benchmark DIA (7.89 ) in the same period.
- Compared with DIA (7.03 ) in the period of the last 3 years, the Ulcer Index of 2.56 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:- Looking at the maximum DrawDown of -10.9 days in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (-36.7 days)
- During the last 3 years, the maximum DrawDown is -7 days, which is greater, thus better than the value of -20.8 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'

Applying this definition to our asset in some examples:- The maximum days below previous high over 5 years of Dow 30 Strategy is 280 days, which is smaller, thus better compared to the benchmark DIA (351 days) in the same period.
- During the last 3 years, the maximum time in days below previous high water mark is 280 days, which is smaller, thus better than the value of 351 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.'

Which means for our asset as example:- The average time in days below previous high water mark over 5 years of Dow 30 Strategy is 53 days, which is smaller, thus better compared to the benchmark DIA (84 days) in the same period.
- Compared with DIA (98 days) in the period of the last 3 years, the average days under water of 68 days is lower, thus better.

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.