The Short Term Bond Strategy is essentially a place to park cash that earns interest. When combined with other higher risk strategies it creates a lower risk portfolio and generally improves the portfolio's Sharpe ratio. If your broker pays interest on cash balances that is comparable to the current yield of this strategy, you can choose to keep this allocation in cash instead.

This strategy switches between very low risk ETFs that hold short term corporate or treasury bonds including GSY, MINT and NEAR.

'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:- Looking at the total return of 10.7% in the last 5 years of Short Term Bond Strategy, we see it is relatively lower, thus worse in comparison to the benchmark TLT (31.4%)
- During the last 3 years, the total return, or performance is 7.5%, which is smaller, thus worse than the value of 31.1% from the benchmark.

'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.'

Using this definition on our asset we see for example:- The annual return (CAGR) over 5 years of Short Term Bond Strategy is 2.1%, which is lower, thus worse compared to the benchmark TLT (5.6%) in the same period.
- During the last 3 years, the annual return (CAGR) is 2.5%, which is lower, thus worse than the value of 9.5% 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.'

Applying this definition to our asset in some examples:- Looking at the volatility of 0.5% in the last 5 years of Short Term Bond Strategy, we see it is relatively lower, thus better in comparison to the benchmark TLT (11.9%)
- Compared with TLT (10.4%) in the period of the last 3 years, the historical 30 days volatility of 0.4% is lower, thus better.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:- Compared with the benchmark TLT (8.5%) in the period of the last 5 years, the downside risk of 0.3% of Short Term Bond Strategy is lower, thus better.
- Looking at downside risk in of 0.2% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to TLT (7.1%).

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Using this definition on our asset we see for example:- The Sharpe Ratio over 5 years of Short Term Bond Strategy is -0.94, which is lower, thus worse compared to the benchmark TLT (0.26) in the same period.
- During the last 3 years, the Sharpe Ratio is -0.13, which is lower, thus worse than the value of 0.67 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 TLT (0.37) in the period of the last 5 years, the downside risk / excess return profile of -1.54 of Short Term Bond Strategy is lower, thus worse.
- During the last 3 years, the excess return divided by the downside deviation is -0.23, which is smaller, thus worse than the value of 0.98 from the benchmark.

'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:- Compared with the benchmark TLT (9.47 ) in the period of the last 5 years, the Ulcer Index of 0.05 of Short Term Bond Strategy is smaller, thus better.
- Looking at Ulcer Ratio in of 0.03 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to TLT (4.43 ).

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Which means for our asset as example:- Looking at the maximum drop from peak to valley of -0.4 days in the last 5 years of Short Term Bond Strategy, we see it is relatively greater, thus better in comparison to the benchmark TLT (-17.9 days)
- Compared with TLT (-10.7 days) in the period of the last 3 years, the maximum DrawDown of -0.2 days is greater, thus better.

'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.'

Using this definition on our asset we see for example:- The maximum days below previous high over 5 years of Short Term Bond Strategy is 47 days, which is smaller, thus better compared to the benchmark TLT (749 days) in the same period.
- Compared with TLT (385 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 22 days is smaller, thus better.

'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:- Compared with the benchmark TLT (259 days) in the period of the last 5 years, the average time in days below previous high water mark of 6 days of Short Term Bond Strategy is smaller, thus better.
- During the last 3 years, the average days under water is 3 days, which is lower, thus better than the value of 119 days from the benchmark.

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 Short Term Bond 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.