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, 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.'

Using this definition on our asset we see for example:- Looking at the total return, or performance of 80.2% in the last 5 years of Dow 30 Strategy, we see it is relatively higher, thus better in comparison to the benchmark DIA (77.5%)
- During the last 3 years, the total return is 34.7%, which is smaller, thus worse than the value of 59.9% from the benchmark.

'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:- The annual performance (CAGR) over 5 years of Dow 30 Strategy is 12.5%, which is larger, thus better compared to the benchmark DIA (12.2%) in the same period.
- During the last 3 years, the annual return (CAGR) is 10.5%, which is lower, thus worse than the value of 17% from the benchmark.

'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.'

Which means for our asset as example:- The 30 days standard deviation over 5 years of Dow 30 Strategy is 8.7%, which is lower, thus better compared to the benchmark DIA (13.7%) in the same period.
- During the last 3 years, the 30 days standard deviation is 8.6%, 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.'

Which means for our asset as example:- Compared with the benchmark DIA (15.2%) in the period of the last 5 years, the downside deviation of 9.7% of Dow 30 Strategy is lower, thus better.
- Looking at downside volatility in of 9.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (14.9%).

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (0.71) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.15 of Dow 30 Strategy is greater, thus better.
- Looking at Sharpe Ratio in of 0.92 in the period of the last 3 years, we see it is relatively lower, thus worse 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.'

Which means for our asset as example:- Looking at the excess return divided by the downside deviation of 1.03 in the last 5 years of Dow 30 Strategy, we see it is relatively greater, thus better in comparison to the benchmark DIA (0.64)
- Looking at downside risk / excess return profile in of 0.81 in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to DIA (0.97).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (4.28 ) in the period of the last 5 years, the Ulcer Index of 3.06 of Dow 30 Strategy is lower, thus better.
- During the last 3 years, the Downside risk index is 3.34 , which is lower, thus better than the value of 4.22 from the benchmark.

'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.'

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 higher, 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 Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:- Looking at the maximum days under water of 146 days in the last 5 years of Dow 30 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark DIA (227 days)
- During the last 3 years, the maximum days under water is 146 days, which is lower, thus better than the value of 161 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.'

Using this definition on our asset we see for example:- The average days under water over 5 years of Dow 30 Strategy is 33 days, which is lower, thus better compared to the benchmark DIA (53 days) in the same period.
- Looking at average time in days below previous high water mark in of 34 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (43 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.