This portfolio has been optimized for achieving the highest possible return while limiting the historical volatility to 7% or less over the analyzed period with the involved assets. The volatility limit of 7% equals about half the volatility, or risk, of the iShares 20+ Year Treasury Bond ETF - TLT.

As such it is a very conservative Portfolio suited for very risk adverse investors with conservative 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 (BRS) (0% to 100%)
- BUG Permanent Portfolio Strategy (BUG) (0% to 100%)
- World Top 4 Strategy (WTOP4) (0% to 100%)
- Global Sector Rotation Strategy (GSRS) (0% to 100%)
- Global Market Rotation Strategy (GMRS) (0% to 100%)
- Maximum Yield Strategy (MYRS) (0% to 100%)
- NASDAQ 100 Strategy (NAS100) (0% to 100%)
- Leveraged Gold-Currency Strategy (GLD-USD) (0% to 100%)
- US Sector Rotation Strategy (USSECT) (0% to 100%)
- Leveraged Universal Investment Strategy (UISx3) (0% to 100%)
- US Market Strategy (USMarket) (0% to 100%)
- Dow 30 Strategy (DOW30) (0% to 100%)
- Universal Investment Strategy (UIS) (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.'

Using this definition on our asset we see for example:- The total return, or performance over 5 years of Volatility less than 7% is 83.7%, which is higher, thus better compared to the benchmark SPY (71.4%) in the same period.
- Looking at total return, or performance in of 40.1% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (47.3%).

'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:- Compared with the benchmark SPY (11.4%) in the period of the last 5 years, the annual return (CAGR) of 12.9% of Volatility less than 7% is greater, thus better.
- Compared with SPY (13.8%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 11.9% is smaller, thus worse.

'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.'

Applying this definition to our asset in some examples:- Looking at the volatility of 5.8% in the last 5 years of Volatility less than 7%, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.2%)
- Looking at historical 30 days volatility in of 5% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.4%).

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. 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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (14.5%) in the period of the last 5 years, the downside volatility of 6.5% of Volatility less than 7% is lower, thus better.
- During the last 3 years, the downside risk is 5.7%, which is lower, thus better than the value of 14.1% from the benchmark.

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Which means for our asset as example:- Looking at the ratio of return and volatility (Sharpe) of 1.8 in the last 5 years of Volatility less than 7%, we see it is relatively greater, thus better in comparison to the benchmark SPY (0.67)
- During the last 3 years, the Sharpe Ratio is 1.89, which is larger, thus better than the value of 0.91 from the benchmark.

'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:- Looking at the ratio of annual return and downside deviation of 1.61 in the last 5 years of Volatility less than 7%, we see it is relatively higher, thus better in comparison to the benchmark SPY (0.61)
- Compared with SPY (0.8) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.64 is higher, thus better.

'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.'

Applying this definition to our asset in some examples:- The Downside risk index over 5 years of Volatility less than 7% is 1.75 , which is lower, thus worse compared to the benchmark SPY (3.95 ) in the same period.
- Compared with SPY (4.01 ) in the period of the last 3 years, the Ulcer Ratio of 1.32 is lower, thus worse.

'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:- Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -7.3 days of Volatility less than 7% is larger, thus better.
- Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of -4.7 days is higher, thus better.

'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 (187 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 185 days of Volatility less than 7% is smaller, thus better.
- During the last 3 years, the maximum days under water is 168 days, which is higher, thus worse than the value of 139 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.'

Which means for our asset as example:- Looking at the average days under water of 39 days in the last 5 years of Volatility less than 7%, we see it is relatively lower, thus better in comparison to the benchmark SPY (41 days)
- Compared with SPY (36 days) in the period of the last 3 years, the average time in days below previous high water mark of 34 days is lower, thus better.

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 Volatility less than 7% 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.