This portfolio has been optimized for achieving the highest possible return while limiting the historical volatility to 10% or less over the analyzed period with the involved assets. As a reference, the volatility limit of 10% is about two thirds of the volatility, or risk, of the SPDR S&P 500 (SPY).

As such it is a conservative Portfolio suited for risk adverse investors with moderate growth expectations.

Please note that this portfolio might use leveraged ETF and single stocks. Should these not be allowed in your retirement account please see our 401k and IRS compatible Conservative, Moderate, and Aggressive Risk Portfolios. Contact us for special requirements.

While this portfolio provides an optimized asset allocation based on historical returns, your investment objectives, risk profile and personal experience are important factors when deciding on the best investment vehicle for yourself. You can also use the Portfolio Builder or Portfolio Optimizer to construct your own personalized portfolio.

Assets and weight constraints used in the optimizer process:

- Bond ETF Rotation Strategy (0% to 100%)
- BUG Permanent Portfolio Strategy (0% to 100%)
- World Top 4 Strategy (0% to 100%)
- Global Sector Rotation Strategy (0% to 100%)
- Global Market Rotation Strategy (0% to 100%)
- Maximum Yield Strategy (0% to 100%)
- NASDAQ 100 Strategy (0% to 100%)
- Leveraged Gold-Currency Strategy (0% to 100%)
- US Sector Rotation Strategy (0% to 100%)
- Leveraged Universal Investment Strategy (0% to 100%)
- US Market Strategy (0% to 100%)
- Dow 30 Strategy (0% to 100%)
- Universal Investment Strategy (0% to 100%)

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (68%) in the period of the last 5 years, the total return, or performance of 147.1% of Volatility less than 10% is higher, thus better.
- During the last 3 years, the total return, or performance is 73.6%, which is greater, thus better than the value of 53.9% from the benchmark.

'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.'

Using this definition on our asset we see for example:- The annual performance (CAGR) over 5 years of Volatility less than 10% is 19.8%, which is greater, thus better compared to the benchmark SPY (10.9%) in the same period.
- Looking at annual performance (CAGR) in of 20.2% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (15.5%).

'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.'

Which means for our asset as example:- Compared with the benchmark SPY (13.2%) in the period of the last 5 years, the volatility of 8.1% of Volatility less than 10% is lower, thus better.
- During the last 3 years, the 30 days standard deviation is 7.8%, which is smaller, thus better than the value of 12.6% from the benchmark.

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

Applying this definition to our asset in some examples:- The downside volatility over 5 years of Volatility less than 10% is 9.1%, which is smaller, thus better compared to the benchmark SPY (14.6%) in the same period.
- During the last 3 years, the downside deviation is 8.9%, which is lower, thus better than the value of 14.2% from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (0.64) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 2.14 of Volatility less than 10% is higher, thus better.
- Compared with SPY (1.03) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 2.28 is greater, thus better.

'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.'

Which means for our asset as example:- Looking at the excess return divided by the downside deviation of 1.91 in the last 5 years of Volatility less than 10%, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.58)
- During the last 3 years, the excess return divided by the downside deviation is 1.98, which is higher, thus better than the value of 0.91 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 Downside risk index of 1.32 in the last 5 years of Volatility less than 10%, we see it is relatively lower, thus worse in comparison to the benchmark SPY (3.93 )
- During the last 3 years, the Ulcer Ratio is 1.25 , which is smaller, thus worse than the value of 3.95 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -5 days of Volatility less than 10% is higher, thus better.
- During the last 3 years, the maximum reduction from previous high is -5 days, which is higher, thus better than the value of -19.3 days from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The maximum time in days below previous high water mark over 5 years of Volatility less than 10% is 97 days, which is smaller, thus better compared to the benchmark SPY (187 days) in the same period.
- Looking at maximum days below previous high in of 97 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (131 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.'

Applying this definition to our asset in some examples:- Looking at the average days under water of 15 days in the last 5 years of Volatility less than 10%, we see it is relatively smaller, thus better in comparison to the benchmark SPY (37 days)
- Looking at average days below previous high in of 17 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (30 days).

Allocations and holdings shown below are delayed by one month. To see current trading allocations of Volatility less than 10%, register now.

()

Performance results of Volatility less than 10% are hypothetical, do not account for slippage, execution cost and taxes, and based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.