IMPORTANT: This strategy may use a leveraged GLD position which may cause the total allocation of the strategy to exceed 100%. See more information in this article.

The 3X Universal Investment Strategy (UISx3) is a leveraged version of our core Universal Investment Strategy (UIS), an evolved, intelligent version of the classic 60/40 equity/bond portfolio that can adapt to current conditions, shifting portfolio weight away from stocks in difficult markets and adding weight to equity in bull runs.

The 3x leveraged version of the strategy employs SPXL and TMF, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF. Since there is currently no leveraged gold ETF the strategy uses a triple position in GLD. Unlike the base UIS, the leveraged version only uses TMF and GLD to hedge SPXL exposure.

The UISx3 is appropriate for investors who are comfortable taking on higher risks in exchange for the potential for of higher returns. Because leveraged ETFs are used, we recommend allocating no more than 15% of your total portfolio to this strategy.

- SPXL - Direxion Daily S&P 500 Bull 3X Shares ETF
- TMF - Direxion Daily 30-Year Treasury Bull 3x Shares ETF
- GLD - SPDR Gold Trust

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (65.4%) in the period of the last 5 years, the total return, or performance of 116.7% of Universal Investment Strategy 3x Leverage is larger, thus better.
- During the last 3 years, the total return, or performance is 53.3%, which is greater, thus better than the value of 34.4% 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 performance (CAGR) over 5 years of Universal Investment Strategy 3x Leverage is 16.8%, which is higher, thus better compared to the benchmark SPY (10.6%) in the same period.
- Compared with SPY (10.4%) in the period of the last 3 years, the annual return (CAGR) of 15.3% is higher, thus better.

'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:- The 30 days standard deviation over 5 years of Universal Investment Strategy 3x Leverage is 25.4%, which is larger, thus worse compared to the benchmark SPY (21.4%) in the same period.
- Looking at historical 30 days volatility in of 29% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (24.8%).

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

Which means for our asset as example:- The downside volatility over 5 years of Universal Investment Strategy 3x Leverage is 18.2%, which is larger, thus worse compared to the benchmark SPY (15.5%) in the same period.
- During the last 3 years, the downside deviation is 20.9%, which is larger, thus worse than the value of 18% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.38) in the period of the last 5 years, the Sharpe Ratio of 0.56 of Universal Investment Strategy 3x Leverage is higher, thus better.
- Compared with SPY (0.32) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.44 is greater, thus better.

'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:- The excess return divided by the downside deviation over 5 years of Universal Investment Strategy 3x Leverage is 0.78, which is larger, thus better compared to the benchmark SPY (0.52) in the same period.
- Compared with SPY (0.44) in the period of the last 3 years, the downside risk / excess return profile of 0.61 is higher, 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.'

Using this definition on our asset we see for example:- Looking at the Downside risk index of 11 in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus worse in comparison to the benchmark SPY (8.48 )
- Compared with SPY (10 ) in the period of the last 3 years, the Downside risk index of 13 is higher, thus worse.

'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 reduction from previous high over 5 years of Universal Investment Strategy 3x Leverage is -38.4 days, which is lower, thus worse compared to the benchmark SPY (-33.7 days) in the same period.
- Looking at maximum DrawDown in of -38.4 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (-33.7 days).

'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.'

Applying this definition to our asset in some examples:- Looking at the maximum days under water of 228 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively lower, thus better in comparison to the benchmark SPY (232 days)
- During the last 3 years, the maximum time in days below previous high water mark is 188 days, which is lower, thus better than the value of 232 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.'

Applying this definition to our asset in some examples:- Looking at the average days below previous high of 63 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively larger, thus worse in comparison to the benchmark SPY (54 days)
- Looking at average days under water in of 58 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (58 days).

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 Universal Investment Strategy 3x Leverage 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.