We developed the Dow 30 Top 4 Strategy some years ago together with the Nasdaq 100 strategy. We waited to published it because the Nasdaq 100 Top 4 Strategy was outperforming the Dow Strategy in the technology driven bull market we've had in recent years. Going forward however, the Dow 30 Top 4 Strategy could be very beneficial, as stock picking becomes much more important in volatile, sideways moving markets.

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 is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Applying this definition to our asset in some examples:- The total return over 5 years of Dow 30 Strategy is 123.1%, which is larger, thus better compared to the benchmark DIA (78.3%) in the same period.
- Compared with DIA (58%) in the period of the last 3 years, the total return, or performance of 59.8% is higher, thus better.

'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.'

Which means for our asset as example:- The compounded annual growth rate (CAGR) over 5 years of Dow 30 Strategy is 17.4%, which is higher, thus better compared to the benchmark DIA (12.3%) in the same period.
- Looking at compounded annual growth rate (CAGR) in of 16.9% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (16.5%).

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Applying this definition to our asset in some examples:- Looking at the volatility of 8.5% in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (13.3%)
- During the last 3 years, the volatility is 8.1%, which is smaller, thus better than the value of 12.7% from the benchmark.

'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:- Looking at the downside volatility of 9.2% in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (14.7%)
- Compared with DIA (14.3%) in the period of the last 3 years, the downside risk of 9% is lower, thus better.

'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 ratio of return and volatility (Sharpe) of 1.76 in the last 5 years of Dow 30 Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (0.74)
- Looking at ratio of return and volatility (Sharpe) in of 1.78 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (1.1).

'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:- Looking at the ratio of annual return and downside deviation of 1.61 in the last 5 years of Dow 30 Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (0.66)
- Compared with DIA (0.98) in the period of the last 3 years, the downside risk / excess return profile of 1.61 is greater, 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 DIA (4.21 ) in the period of the last 5 years, the Ulcer Index of 2 of Dow 30 Strategy is lower, thus worse.
- During the last 3 years, the Ulcer Index is 1.55 , which is lower, thus worse than the value of 4.12 from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The maximum DrawDown over 5 years of Dow 30 Strategy is -9.7 days, which is greater, thus better compared to the benchmark DIA (-18.1 days) in the same period.
- During the last 3 years, the maximum drop from peak to valley is -6.3 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:- The maximum time in days below previous high water mark over 5 years of Dow 30 Strategy is 133 days, which is lower, thus better compared to the benchmark DIA (227 days) in the same period.
- Looking at maximum days below previous high in of 103 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (161 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.'

Which means for our asset as example:- Compared with the benchmark DIA (51 days) in the period of the last 5 years, the average time in days below previous high water mark of 25 days of Dow 30 Strategy is lower, thus better.
- Looking at average time in days below previous high water mark in of 23 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (40 days).

Historical returns have been extended using synthetic data.
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- "Year" returns in the table above are not equal to 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.