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, TMF and UGLD, which are the leveraged versions of the S&P 500 ETF, the Treasury 20+ year ETF and the Gold ETF. Unlike the base UIS, the leveraged version only uses TMF and UGLD 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
- UGLD - VelocityShares 3x Long Gold ETN

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (68.2%) in the period of the last 5 years, the total return, or performance of 201.2% of Leveraged Universal Investment Strategy is larger, thus better.
- Compared with SPY (47.7%) in the period of the last 3 years, the total return of 84.7% 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 Leveraged Universal Investment Strategy is 24.7%, which is greater, thus better compared to the benchmark SPY (11%) in the same period.
- Compared with SPY (13.9%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 22.7% is larger, thus better.

'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.'

Using this definition on our asset we see for example:- Looking at the volatility of 22.9% in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively greater, thus worse in comparison to the benchmark SPY (13.2%)
- Looking at volatility in of 22.1% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (12.4%).

'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:- The downside deviation over 5 years of Leveraged Universal Investment Strategy is 25.3%, which is greater, thus worse compared to the benchmark SPY (14.6%) in the same period.
- Compared with SPY (14%) in the period of the last 3 years, the downside volatility of 24.5% is higher, thus worse.

'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.'

Which means for our asset as example:- The Sharpe Ratio over 5 years of Leveraged Universal Investment Strategy is 0.97, which is higher, thus better compared to the benchmark SPY (0.64) in the same period.
- During the last 3 years, the Sharpe Ratio is 0.91, which is smaller, thus worse than the value of 0.92 from the benchmark.

'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 Leveraged Universal Investment Strategy is 0.88, which is larger, thus better compared to the benchmark SPY (0.58) in the same period.
- During the last 3 years, the ratio of annual return and downside deviation is 0.82, which is higher, thus better than the value of 0.81 from the benchmark.

'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:- Looking at the Ulcer Index of 14 in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively higher, thus better in comparison to the benchmark SPY (3.95 )
- Looking at Ulcer Ratio in of 16 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (4 ).

'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 Leveraged Universal Investment Strategy is -38.3 days, which is smaller, thus worse compared to the benchmark SPY (-19.3 days) in the same period.
- Looking at maximum DrawDown in of -38.3 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (-19.3 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.'

Which means for our asset as example:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum days below previous high of 311 days of Leveraged Universal Investment Strategy is larger, thus worse.
- During the last 3 years, the maximum days below previous high is 288 days, which is greater, thus worse than the value of 131 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:- Looking at the average time in days below previous high water mark of 93 days in the last 5 years of Leveraged Universal Investment Strategy, we see it is relatively higher, thus worse in comparison to the benchmark SPY (39 days)
- Looking at average days under water in of 81 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (33 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 Leveraged Universal Investment 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.