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.

'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.'

Using this definition on our asset we see for example:- The total return, or increase in value over 5 years of Dow 30 Strategy is 89.8%, which is greater, thus better compared to the benchmark DIA (67.5%) in the same period.
- Compared with DIA (25.6%) in the period of the last 3 years, the total return, or increase in value of 29.4% is higher, thus better.

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Which means for our asset as example:- Compared with the benchmark DIA (10.9%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 13.7% of Dow 30 Strategy is higher, thus better.
- Looking at annual return (CAGR) in of 9% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (7.9%).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark DIA (20.6%) in the period of the last 5 years, the volatility of 8.6% of Dow 30 Strategy is smaller, thus better.
- During the last 3 years, the historical 30 days volatility is 6.8%, which is lower, thus better than the value of 14.8% 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.'

Using this definition on our asset we see for example:- The downside volatility over 5 years of Dow 30 Strategy is 5.9%, which is smaller, thus better compared to the benchmark DIA (14.8%) in the same period.
- During the last 3 years, the downside deviation is 4.7%, which is smaller, thus better than the value of 10.4% 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:- Looking at the risk / return profile (Sharpe) of 1.3 in the last 5 years of Dow 30 Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (0.41)
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.95, which is greater, thus better than the value of 0.36 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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.57) in the period of the last 5 years, the downside risk / excess return profile of 1.89 of Dow 30 Strategy is higher, thus better.
- Looking at ratio of annual return and downside deviation in of 1.39 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (0.52).

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:- Looking at the Downside risk index of 2.94 in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (7.68 )
- Looking at Ulcer Index in of 3.45 in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to DIA (7.09 ).

'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.'

Using this definition on our asset we see for example:- Looking at the maximum reduction from previous high 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 drop from peak to valley is -7.7 days, which is higher, 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:- Compared with the benchmark DIA (477 days) in the period of the last 5 years, the maximum days below previous high of 424 days of Dow 30 Strategy is lower, thus better.
- Compared with DIA (477 days) in the period of the last 3 years, the maximum days under water of 424 days is smaller, thus better.

'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:- Looking at the average time in days below previous high water mark of 91 days in the last 5 years of Dow 30 Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (122 days)
- Compared with DIA (168 days) in the period of the last 3 years, the average days under water of 137 days is smaller, 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 and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.