Description

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.

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or increase in value of 100.3% in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus worse in comparison to the benchmark DIA (110.8%)
  • Looking at total return, or increase in value in of 38.5% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to DIA (43.8%).

CAGR:

'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.'

Which means for our asset as example:
  • Looking at the annual performance (CAGR) of 14.9% in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark DIA (16.1%)
  • Compared with DIA (12.9%) in the period of the last 3 years, the annual return (CAGR) of 11.5% is smaller, thus worse.

Volatility:

'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:
  • Looking at the 30 days standard deviation of 8.3% in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (19.9%)
  • During the last 3 years, the 30 days standard deviation is 9.2%, which is smaller, thus better than the value of 24% from the benchmark.

DownVol:

'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.'

Which means for our asset as example:
  • Compared with the benchmark DIA (14.4%) in the period of the last 5 years, the downside volatility of 5.8% of Dow 30 Strategy is smaller, thus better.
  • During the last 3 years, the downside volatility is 6.5%, which is lower, thus better than the value of 17.4% from the benchmark.

Sharpe:

'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:
  • Looking at the risk / return profile (Sharpe) of 1.49 in the last 5 years of Dow 30 Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (0.68)
  • Looking at Sharpe Ratio in of 0.97 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to DIA (0.43).

Sortino:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark DIA (0.94) in the period of the last 5 years, the excess return divided by the downside deviation of 2.16 of Dow 30 Strategy is greater, thus better.
  • During the last 3 years, the ratio of annual return and downside deviation is 1.39, which is higher, thus better than the value of 0.6 from the benchmark.

Ulcer:

'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 DIA (6.28 ) in the period of the last 5 years, the Ulcer Ratio of 1.79 of Dow 30 Strategy is lower, thus better.
  • Compared with DIA (7.57 ) in the period of the last 3 years, the Downside risk index of 1.99 is lower, thus better.

MaxDD:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the maximum drop from peak to valley of -13.6 days in the last 5 years of Dow 30 Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (-36.7 days)
  • Compared with DIA (-36.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -13.6 days is higher, thus better.

MaxDuration:

'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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark DIA (187 days) in the period of the last 5 years, the maximum days below previous high of 125 days of Dow 30 Strategy is lower, thus better.
  • Compared with DIA (187 days) in the period of the last 3 years, the maximum days under water of 73 days is lower, thus better.

AveDuration:

'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 days under water over 5 years of Dow 30 Strategy is 21 days, which is lower, thus better compared to the benchmark DIA (46 days) in the same period.
  • During the last 3 years, the average days below previous high is 16 days, which is lower, thus better than the value of 48 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • 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.