Due to announced delisting of UGLD as of July 12, 2020, with last trading day July 2, 2020, we're replacing UGLD by a leveraged GLD position. Therefore the total allocation of the strategy can 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, 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

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Which means for our asset as example:- The total return, or performance over 5 years of Universal Investment Strategy 3x Leverage is 377.4%, which is greater, thus better compared to the benchmark SPY (115.6%) in the same period.
- Compared with SPY (43%) in the period of the last 3 years, the total return, or increase in value of 104.8% 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.'

Applying this definition to our asset in some examples:- Looking at the annual return (CAGR) of 36.7% in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively larger, thus better in comparison to the benchmark SPY (16.6%)
- Compared with SPY (12.6%) in the period of the last 3 years, the annual return (CAGR) of 27% is greater, thus better.

'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:- The volatility over 5 years of Universal Investment Strategy 3x Leverage is 25.7%, which is larger, thus worse compared to the benchmark SPY (18.8%) in the same period.
- Looking at 30 days standard deviation in of 29.5% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (22.8%).

'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:- The downside risk over 5 years of Universal Investment Strategy 3x Leverage is 18.2%, which is greater, thus worse compared to the benchmark SPY (13.6%) in the same period.
- Looking at downside risk in of 21.3% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (16.7%).

'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:- The risk / return profile (Sharpe) over 5 years of Universal Investment Strategy 3x Leverage is 1.33, which is larger, thus better compared to the benchmark SPY (0.75) in the same period.
- Looking at Sharpe Ratio in of 0.83 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.44).

'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 SPY (1.04) in the period of the last 5 years, the downside risk / excess return profile of 1.88 of Universal Investment Strategy 3x Leverage is larger, thus better.
- Looking at excess return divided by the downside deviation in of 1.15 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.61).

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Which means for our asset as example:- Compared with the benchmark SPY (5.59 ) in the period of the last 5 years, the Ulcer Ratio of 8.48 of Universal Investment Strategy 3x Leverage is higher, thus worse.
- Compared with SPY (7.14 ) in the period of the last 3 years, the Ulcer Ratio of 9.84 is greater, thus worse.

'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 reduction from previous high of -40.7 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)
- Looking at maximum drop from peak to valley in of -40.7 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (-33.7 days).

'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:- Looking at the maximum time in days below previous high water mark of 265 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark SPY (139 days)
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 265 days is higher, thus worse.

'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 days below previous high of 51 days in the last 5 years of Universal Investment Strategy 3x Leverage, we see it is relatively higher, thus worse in comparison to the benchmark SPY (33 days)
- Compared with SPY (45 days) in the period of the last 3 years, the average days below previous high of 69 days is greater, 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, 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.