The U.S. Market Strategy was designed as an alternative to our Universal Investment Strategy which allocates between SPY (S&P 500 ETF) and TLT (U.S. Treasuries ETF). The equity component of this new strategy switches between SPY (S&P500), QQQ (Nasdaq 100), DIA (Dow 30) and SPLV (S&P 500 low volatility) so it can take advantage of different market conditions. The addition of SPLV provides a good defensive option in times of high market volatility.

In addition to U.S. equities, the strategy utilizes a hedge strategy that switches between TLT, TIP, UUP and GLD.

The strategy's backtests performed substantially better than a simple SPY-TLT investment. All of the component ETFs are very liquid with small spreads making them easy to trade with negligible costs.

'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.'

Which means for our asset as example:- Looking at the total return, or performance of 87.2% in the last 5 years of US Market Strategy, we see it is relatively larger, thus better in comparison to the benchmark DIA (53.7%)
- Looking at total return in of 52.6% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (27.8%).

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Applying this definition to our asset in some examples:- The compounded annual growth rate (CAGR) over 5 years of US Market Strategy is 13.4%, which is greater, thus better compared to the benchmark DIA (9%) in the same period.
- Looking at compounded annual growth rate (CAGR) in of 15.1% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (8.5%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark DIA (21.6%) in the period of the last 5 years, the historical 30 days volatility of 9% of US Market Strategy is lower, thus better.
- During the last 3 years, the volatility is 10%, which is smaller, thus better than the value of 24.9% from the benchmark.

'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 DIA (15.7%) in the period of the last 5 years, the downside deviation of 6.4% of US Market Strategy is smaller, thus better.
- Compared with DIA (18%) in the period of the last 3 years, the downside risk of 7.1% is lower, thus better.

'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:- Compared with the benchmark DIA (0.3) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.21 of US Market Strategy is larger, thus better.
- Looking at ratio of return and volatility (Sharpe) in of 1.26 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to DIA (0.24).

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Which means for our asset as example:- Compared with the benchmark DIA (0.41) in the period of the last 5 years, the excess return divided by the downside deviation of 1.7 of US Market Strategy is higher, thus better.
- During the last 3 years, the excess return divided by the downside deviation is 1.78, which is larger, thus better than the value of 0.33 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:- Looking at the Ulcer Ratio of 2.77 in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (7.86 )
- Looking at Ulcer Ratio in of 3.2 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to DIA (9.22 ).

'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:- The maximum drop from peak to valley over 5 years of US Market Strategy is -13.1 days, which is greater, thus better compared to the benchmark DIA (-36.7 days) in the same period.
- Looking at maximum reduction from previous high in of -13.1 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to DIA (-36.7 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). 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'

Which means for our asset as example:- Looking at the maximum days below previous high of 161 days in the last 5 years of US Market Strategy, we see it is relatively lower, thus better in comparison to the benchmark DIA (234 days)
- During the last 3 years, the maximum days below previous high is 161 days, which is smaller, thus better than the value of 234 days from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The average days under water over 5 years of US Market Strategy is 34 days, which is smaller, thus better compared to the benchmark DIA (65 days) in the same period.
- During the last 3 years, the average days under water is 37 days, which is lower, thus better than the value of 70 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 US Market 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.