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.'

Using this definition on our asset we see for example:- Looking at the total return of 153.6% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus better in comparison to the benchmark SPY (103.4%)
- Looking at total return in of 11.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (33.4%).

'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.'

Applying this definition to our asset in some examples:- Looking at the compounded annual growth rate (CAGR) of 20.5% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively greater, thus better in comparison to the benchmark SPY (15.3%)
- Looking at compounded annual growth rate (CAGR) in of 3.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (10.1%).

'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:- Compared with the benchmark SPY (20.9%) in the period of the last 5 years, the historical 30 days volatility of 27.1% of Universal Investment Strategy 3x Leverage is higher, thus worse.
- Looking at historical 30 days volatility in of 24.1% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (17.3%).

'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:- Compared with the benchmark SPY (14.9%) in the period of the last 5 years, the downside risk of 19.1% of Universal Investment Strategy 3x Leverage is higher, thus worse.
- Compared with SPY (12.1%) in the period of the last 3 years, the downside risk of 16.9% is greater, thus worse.

'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.'

Which means for our asset as example:- Looking at the Sharpe Ratio of 0.66 in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.61)
- Compared with SPY (0.44) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.05 is lower, thus worse.

'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.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 0.94 in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.85)
- Compared with SPY (0.63) in the period of the last 3 years, the downside risk / excess return profile of 0.08 is smaller, thus worse.

'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 16 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 (9.32 )
- During the last 3 years, the Ulcer Index is 20 , which is larger, thus worse than the value of 10 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 reduction from previous high of -38.4 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively lower, thus worse in comparison to the benchmark SPY (-33.7 days)
- During the last 3 years, the maximum DrawDown is -38.4 days, which is smaller, thus worse than the value of -24.5 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'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (488 days) in the period of the last 5 years, the maximum days under water of 525 days of Universal Investment Strategy 3x Leverage is higher, thus worse.
- Looking at maximum time in days below previous high water mark in of 525 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (488 days).

'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.'

Using this definition on our asset we see for example:- The average days below previous high over 5 years of Universal Investment Strategy 3x Leverage is 140 days, which is larger, thus worse compared to the benchmark SPY (123 days) in the same period.
- Compared with SPY (180 days) in the period of the last 3 years, the average time in days below previous high water mark of 194 days is larger, thus worse.

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 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.