Here are two backtests charts of the new MYRS strategy with adaptive allocation, now also suitable for your retirement account. The annual return of the old and the new strategy is more or less the same. During low volatility markets, the return of the new strategy is probably slightly lower, however during difficult volatile years like 2014, the return of the new strategy is significantly higher and the drawdowns and the risk is reduced nearly by a factor of 2x. The slightly lower return is due to the fact that some time a part of your capital is invested in the Treasury hedge to reduce risk.
An option for your retirement account?
These US asset classes are:
- U.S. Treasury Bonds – (EDV Vanguard Extended Duration Tsy 25+yr)
- Volatility – (ZIV VelocityShares Inverse VIX Medium-Term)
- cash – (SHY Barclays Low Duration Treasury)
Treasury bonds and inverse Volatility ETFs have significant negative correlation to each other. This means, that whatever the market sentiment is, there is always one assets performing well. The strategy is a good way to profit from VIX contango without risking heavy losses during a volatility spike. The incredibily high return of this strategy does not mean that this strategy is very risky. The strategy minimizes the risk of losses during financial crisis by switching early into Treasurys or even switching to cash if all three assets perform worse than cash. The reward to risk ratio (Sharpe Ratio) of this strategy is 2.1 which is very high compared to 0.93 for a S&P500 investment. Since 2011 you made 6.7x more money with this strategy compared to an average S&P500 investment and this with considerably less risk.”