How to select a strategy that's right for you: The ETFOptimize Premium Strategies provide you with a nearly foolproof way to invest over the coming decades with low drawdowns and exceptionally high returns. However, there is a significant, overriding factor that can determine your long-term investing success – and for this reason, the strategy you choose is crucial to your financial success. That's why we recommend a well-regarded measure of a strategy's Risk-Adjusted Returns (RAR) to help you determine which model is right for you. This article will explain this critical measurement…
With multiple high-performance investment strategies to choose from in our ETF Investment Strategy Suite, how do you select the one that's right for you? After all, you will be following this strategy's guidance for weeks, months, years – even decades to come. While you can change your systems at any time, it is best to choose the appropriate one for you from the start and STICK WITH IT. Following your strategy's recommendations to the letter is the single most powerful thing you can do that can nearly guarantee your investing success.
We would love to sit down with you over a cup of coffee, delve into your finances, and recommend a strategy that will be perfect for your situation. However, in providing an internet-based service that's available widely to the public, and because we are determined to keep your costs as low as reasonably possible, we are unable to have a private conference with each of our subscribers who are anxious to get the exceptional, systematic returns available from the ETFOptimize strategies. Moreover, that kind of personalized attention is prohibited by the SEC for our service classification.
Therefore, we have developed a straightforward approach to select a strategy with which you can be consistently successful over the long term—and we discuss that method below.
Using A Strategy's Sortino Ratio For Guidance
All of us, including veteran professionals, are at risk that subconscious, money-related emotions will overcome us at the worst time, causing us to pull money out of our portfolios when market turbulence increases and we see our holdings take a temporary downturn. This tendency is perhaps the worst trait of discretionary investors; they have an itchy trigger finger and frequently pull the trigger (sell positions) at the slightest hint of risk. For this reason, we recommend that investors— especially those with a limited amount of investment experience— avoid strategies with higher downside volatility.
One way to identify safer strategies is by checking the strategy's Sortino Ratio. The Sortino Ratio measures an investment's total performance relative to its downside volatility (with higher values being better).
The Sortino Ratios (i.e., upside return compared to downside risk) for our strategies are compared in the Premium Strategy Comparison table near the top of our Strategy Suite Preview page. At the time of this article's most recent update, the highest Sortino status goes to our "ULTIMATE 6-Model COMBO (9 ETF) Strategy" with a Sortino Ratio of 3.05, followed by the "NASDAQ Persistent Profits Strategy" with a Sortino ratio of 2.53.
Keep in mind that we designed our rules-based strategies to dramatically reduce downside volatility, which gets reflected in their very high Sortino ratios. As a comparison, the S&P 500 has a Sortino Ratio of just 0.48 since 2000! That's a far cry from the 3.05 Sortino Ratio of the ULTIMATE Strategy!
Investors might also consider each model's Average Max Drawdown, another measure included in the comparison table which measures the average worst downside experienced in any given year. The lowest average Drawdown is -7% for the "S&P 500 Conservative Strategy," followed by -9% for the "ULTIMATE 6-Model COMBO Strategy."
However, when considering the absolute average drawdown, investors should also consider that the ULTIMATE Strategy produces a return TWICE as high as the S&P 500 Conservative Strategy—i.e., at 30% for the Ultimate Strategy to 15% for the Conservative Strategy. As a combination of 6 uncorrelated models, our ULTIMATE COMBO Strategy is designed to be the best choice for all investors if it is within your budget.
Assistance with This Article
If anything discussed on this page needs clarification, please contact us at your convenience.
Note: All ETFOptimize Strategies have FAR LESS downside volatility and lower maximum drawdowns than their market benchmarks (on average, our strategies reduce maximum drawdowns to less than 1/3rd of the S&P 500's drawdowns over the course of a strategy's history). Drawdowns are the peak-to-trough percentage decline of a portfolio during a downturn.
Visit our ETF Investment Strategy Suite!