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Adaptive Equity-Plus (2 ETF) Strategy

Adaptive Equity-Plus (2 ETF) Strategy

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Our Strategy Profile (preview) pages provide investors with a preview of the actual performance of our Premium Strategies that is updated weekly. Many of the charts and tables in this Profile page are a duplicate of the same tables and charts you will find in your Premium Strategy (subscription) page after you register. After registering for the Premium (subscription) Strategy for this model, you'll get full details of Current Holdings, Closed Positions, and recent Transaction information – and regular updates of our award-winning market and investing research.

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With an Annualized Return of 38% for the Adaptive Equity+ Rotation (2 ETF) Strategy, this model produces a total profit that is more than quadruple the 8.39% Annualized Return for a buy-and-hold of the SPDR S&P 500 ETF (SPY) during the same time period (since July 1, 2006). Since its inception, the Adaptive Equity+ Rotation (2 ETF) Strategy has been profitable 100% of the time - 13 of 13 years.

Combined with very low average annual Maximum Drawdown of just -14%, the Equity+ Strategy has a
Risk Adjusted Return (Sortino) of 2.36!

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1) Performance Since Inception

2) Strategy Description

3) Key Statistics Summary

4) The Fixed Income Component

5) Strategy Performance During the Financial Crisis

6) Year-by-Year Performance Detail

7) Risk Measurements

8) Strategy Universes

9) Unique Benefits of This Strategy

10) Your Subscription Includes...

11) 100% Money-Back Guarantee

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The information on this page was most recently updated on:

Sunday, November 10, 2019

Strategies are updated each week by 12-noon (EST) on Sunday. We will announce any delays.
Trades should be filled at mid-day on Monday (or Tuesday if Monday is a market holiday).

NOTE: When a new trade occurs, its price is based on the previous Friday's prices, and that info remains posted until
it is revised to Monday's average price at the next weekend's update using this formula: (High + Low + 2xClose) ÷  4




Results Summary


Note: Since the chart on this page are not logarithmic, recent volatility will appear more significant than past volatility – even if it is actually less in percentage terms.
See the detailed performance charts below for further details.


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The Adaptive Equity+ Rotation (2 ETF) Strategy provides subscribers with an alternative to buying-and-holding the an Equity ETF or discretionary stock selection, achieving far superior performance with a total return since inception back is more than 30-times (3,075%) greater than the return of its benchmark, the S&P 500 ETF (SPY).

In addition to its far higher total performance, this strategy accomplishes its gains with LOWER RISK and in so doing,records an exceptionally high Risk-Adjusted Return (RAR).  The Equity+ Strategy has a Sharpe Ratio of 1.45 and Sortino Ratio of 2.36 (compared to 0.60 and 0.77, respectively, for the S&P 500). With no money-losing years since its inception, the EQUITY+ strategy also outperforms the S&P 500 ETF (SPY) every year since inception.

May 27, 2019 REVISION: The Adaptive Equity+ (2 ETF) Strategy improves on our original "Equity Rotation (2 ETF) Strategy" with two significant improvements:

1) The model utilizes a new ETF Universe, dubbed the "Equities+ Universe" that includes 1,092 carefully-vetted standard Equity ETFs and 11 leveraged (2x) Equity ETFs – compared to just 213 equity ETFs in the previous version of this strategy.

2) This revision of the model employs different market-exposure and ETF-selection criteria, depending on whether we are in the Summer season or the Winter season. That's because our system designers have discovered there are inherent differences between each season that respond well to disparate Buy, Sell, and Timing rules for each period.

Most investors have heard of the investing trope, "Sell in May and go away (until Halloween)," which reflects the natural annual business cycle. The yearly investment environment is driven by upper-income executives taking long holidays throughout the summer and then returning for work in earnest in the fall.

  Coinciding with the work year, the majority of investing takes place between Halloween and late spring (May or June). Because of this seasonal difference and the resulting changes in trading volume, during the slower summer months, investors experience increased volatility that is much more unpredictable. Moreover, economic numbers (employment, GDP, retail sales, and others) often aren't reliably firm until late-October.

 For these reasons, we have found that the summer and winter portions of the year deserve a separate set of assessments of macroeconomic, fundamental and technical criteria, thereby determining the optimum exposure level to the market in both parts of the year. Combined with a quadrupling of the number of ETFs from which we can select and two distinct universe sets for each season, these two changes make for an enormous difference in robustness and performance of this equity-based strategy.

ROTATIONAL SYSTEM: The Adaptive Equity+ (2 ETF) Strategy attains outperformance by using low-volatility leveraged positions during expansionary (bullish) periods, using defensive equity ETFs (such as Staples or Utilities ETFs) when conditions slow, and using Cash-Equivalent ETFs (such as SHY or BIL) during contractionary (bearish) periods. By rotating to the most appropriate ETF group that provides the greatest performance as the business cycle progresses through its phases, the Adaptive Equity+ Strategy achieves the title of our best-performing model!

PERFORMANCE: The result is that the Adaptive Equity+ Rotation (2 ETF) Strategy generates a very steady Average Annualized Return (AR) of about 37% per year (51% in last 3 yrs), with an Average Annualized Max Drawdown (AAMDD) of just -14%. The strategy has an average of 61% winning trades since 2006.

Our abbreviated name for this strategy is EQUITY+.



Data sources: Performance Statistics; Portfolio123, Standard & Poors Global Market Intelligence,
Compustat, S&P Capital IQ, St. Louis Federal Reserve. Most recent update: August 2019 (statistical averages are updated every 3-6 months).

Inception: July 1, 2006
Rebalance Frequency: Weekly
Weighting: 50% in 2 Equity-based ETFs or hedge with Cash-Proxy ETFs (SHY, BIL)
Nearest Benchmark: SPDR S&P 500 ETF Trust (SPY)

PERFORMANCE (Higher is better)
Total Return since Inception (2006): 6,144%
Strategy Annualized Return (avg. per year since 2006): 37%
Benchmark (SPY) Total Return since 2006: 203%
Benchmark (SPY) Annualized Return since 2006: 8.71%
Financial Crisis & Recovery Return: 539.59% (see "Financial Crisis Performance' below)
Percentage of Winning Trades: 61%
Biggest Winner / Biggest Loser: 40.12% / -31%
Winning Trades Held for an average of: 38 days
Losing Trades Held for an average of: 27 days
Average Position Hold Time (all): 33 days (about 1.7 months)

RISK (Lower is better)
Strategy's Number of Money-Losing Years: 0 of 14 = ZERO
Strategy's Number of Years Outperforming S&P 500 (SPY): 14 of 14 (100%)
Strategy's Average Annual Max Drawdown** (AAMDD): -14.36%
Benchmark's (SPY) AAMDD**: -14.34%
Benchmark's (SPY) Max Drawdown: -56%
Strategy's Standard Deviation: 22.57%
Strategy's Annualized Alpha (outperformance of benchmark): 29.63% (36.53% in last 3 years)

RISK-ADJUSTED RETURN (Higher is better)
Sharpe Ratio - Since Inception: 1.47  (Compare to Benchmark at 0.59)
Sharpe Ratio - Last 3 Yrs: 2.44  (Compare to Benchmark at 0.76)
Sortino Ratio - Since Inception: 2.32  (Compare to Benchmark at 1.28)
Sortino Ratio - Last 3 Yrs: 3.59 (Compare to Benchmark at 1.04)

(Our abbreviated name for this strategy is "EQUITY+")

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For all data above: *Past performance is not necessarily indicative of future returns. **Average Annual Max Drawdown (AAMDD) is the average of the worst peak-to-trough drawdowns each year since inception, which we believe is the best representation of the worst declines you might experience as a subscriber in any given year. We also provide the Maximum Drawdown (MDD) figures, which are the very worst drawdown instance that has occurred since inception.







A smooth, steadily climbing performance chart:  As you can see from this chart that runs from the strategy's inception on July 1, 2006 to present, the Adaptive Equity+ Strategy provides a steady and consistent, upward ascent of its equity curve. The Adaptive Equity+ Strategy consistently identifies the market's regime – whether economic conditions are in expansion or contraction – and determines the most appropriate set of two Equity ETFs – or Cash-Proxy ETFs during contractions – for current conditions. This continuous assessment of conditions and rotation of positions keeps your investment funds growing month after month, year after year.

With a compound annual growth rate of about 37%, this easy-to-use, 2-ETF strategy outperforms (631%-times) the average return of its benchmark (the Vanguard Total Stock Market ETF, VTI), and according to data provided by Morningstar, outperforms 100% of mutual funds in the last 3, 5, 10, and 20 year periods. Since inception on July 1, 2006, the Equity+ Strategy has outperformed its benchmark every year since inception and has NEVER EXPERIENCED A MONEY-LOSING YEAR.

The Adaptive Equity+ Strategy's performance is shown by the red line while its benchmark, the Vanguard Total Stock Market ETF (VTI), is represented by the blue line.

Performance Chart – Since Inception
(January 1, 2007 - Present)

 Performance Chart – Since Inception

KEY: The blue line shown as the benchmark is a buy-and-hold of the SPDR S&P 500 ETF (SPY).
The red line shows the ADAPTIVE EQUITY+ (2 ETF) STRATEGY performance since inception.

Note: The charts on this page are not logarithmic and recent volatility in the top (% Return) graph will appear greater than past volatility, even if it is less in percentage terms. To accurately compare recent volatility to past volatility, please see the lower-half (% Drawdown) of each 2-part graph.

 Performance Chart – Last 12 Months

KEY: The blue line shown as the benchmark is a buy-and-hold of the SPDR S&P 500 ETF (SPY).
The red line shows the ADAPTIVE EQUITY+ (2 ETF) STRATEGY performance for the last two years.

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Yearly Performance Bar Chart: This chart tracks each strategy's performance for each calendar year since inception. You can see in the chart below that the performance of the Adaptive Equity+ Strategy (red bars) has been profitable every year (indicated by red bars being above 0%), and in 13 of 13 years, the strategy (red bars) outperformed its S&P 500 benchmark (indicated by the strategy's red bars extending above the benchmark's blue bars).


 Performance Distribution/Comparison

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This table shows the Adaptive Equity+ Strategy Strategy's trade-statistic record since inception. 



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One of the most important measures of the effectiveness of an investment approach is its Risk-Adjusted Return, commonly measured by the Sharpe Ratio or Sortino Ratio. These metrics show the ratio of an investment's performance to its volatility. The Sharpe Ratio measures performance against all volatility, while the Sortino Ratio measure performance against downside volatility only. Investors are prone to making emotionally based, injurious decisions when volatility gets high, so the industry has labeled this factor as 'risk.' A strategy with a high Risk-Adjusted Return is one that provides excellent upside performance with low volatility.

Notice the dramatic outperformance of this strategy when those two ratios are compared to the strategy's benchmark - a buy-and-hold of the Vanguard Total Bond Market ETF (VTI). Since the inception of this strategy, the Sharp Ratio of VTI is 0.60 while its Sortino Ratio is 0.77 – compared to an exceptional Sharpe ratio of 1.50 and Sortino Ratio of 2.36, respectively, for the Adaptive Equity+ Strategy.

You can also see from the last entry on the bottom-right side of the table showing Alpha % (average annual outperformance of a portfolio compared to the performance of its benchmark) that this strategy outperforms its benchmark by an average of more than 30% per year! The actual, year-by-year outperformance is shown in the "Performance Stats - Yearly" table (above).

 Risk Measurement


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Benefits of This Strategy...

Consider the impressive advantages that accompany the Adaptive Equity+ Strategy...

STEADY PROFITS:  By combining two equity-based ETFs, the Adaptive Equity+ (2 ETF) Strategy provides low-volatility, consistent outperformance regardless of market conditions, accompanied by vastly reduced drawdowns. With an Annual Return of about 38%, an average annual Maximum Drawdown of just -14%, the Adaptive Equity-Plus Strategy rewards users with consistent, continuous positive returns.

HIGH RISK-ADJUSTED RETURN (RAR): The Adaptive Equity+ Strategy's Sortino Ratio of 2.36 since inception is one of the highest of all our strategies, and it has an even higher Risk-Adjusted Return of 3.18 in the last three, quite volatile years! We generally use theSortino Ratio as an indicator of Risk-Adjusted Return, because it measures the ratio of strategy's upside appreciation to its downside volatility – which is the risk factor about which nearly all investors are most concerned.


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ROBUST GAINS DURING BOTH RALLIES AND DOWNTURNS:  The combination of two optimum equity ETFs, selected from a universe of 1,073 well-vetted equity ETFs, provides you with performance that can be double the return of the market during bull rallies, and even producing gains during market downturns. The Adaptive Equity+ Strategy produced a return of 540% during the Financial Crisis and its recovery – during a span that the S&P 500 produced return of 0% – 4-1/2 long years that the average investor had no appreciation of their savings – i.e., dead money.  Yet the Equity+ Strategy provided an average Annualized Return of 40% at a time when the S&P 500 was experiencing and recovering from a -56% drawdown!

With our May 2019 revision, when significant market declines occur, this strategy offers a powerful defense by switching to a pair of high-volume, short-term Treasury ETFs (SHY and BIL) that serve as proxies for cash. During the volatile summer months when market volume significantly declines, this strategy switches away from more aggressive and leveraged ETFs to a conservative set of equity ETFs. This approach reduces the strategy's volatility and provides lower annual drawdowns at a time when the market is prone to low-volume swoons. The Equity-Plus Strategy provides investors with an approach that can profit no matter which direction the market is headed – always with a smooth, upward trajectory.

UNEMOTIONAL, EFFICIENT INVESTMENT DECISIONS:  Using an unemotional, mathematically driven trading system enables you to ignore the financial media, with its click-bait pessimistic market outlooks, coffee-amped TV talking heads, and hype-reliant internet shysters who attempt to lure you into their capricious agendas that surreptitiously hijack your wallet. Instead, your weekly ETFOptimize Strategy Update will quietly provide you with the accurate intelligence you need, with detailed documentation of trades when they should occur, details of your strategy's performance for the last week, month, year, and since inception.

You get a comprehensive set of performance, trade and risk statistics so you can quickly check your progress toward achieving your financial goals. Subscribers can sleep soundly know that their strategy is always selecting the optimum positions for conditions and perhaps most advantageous of all – knowing that by design, there is little risk of losing money in any given year.

EASY TO USE:  The ETFOptimize investment strategies minimize the number of trades needed to attain their high performance, with an average of 3.83 months between trades. The Equity+ is Strategy is our most aggressive model and trades a bit more often, with an average hold time of 33.73 market sessions (about 1.7 months). When a transaction occurs, you receive straightforward details for trades that you can quickly execute with the click of a button at your broker's website. For investors who want to become familiar with each position, we provide a link to complete background data and relevant news for each ETF selected for use by the strategy.

Each of the ETFs in the universes from which our models select has been carefully reviewed for tradability, with a rating of 5 out of 5 from FactSet for an investor's ease of trading a $1 million block. ETFs don't trade like stocks, and you should avoid looking at the daily volume for guidance on an ETF's tradeability. What matters most is the volume of the underlying stocks in the index upon which the ETF is based. The ETFs in our universes have ample underlying volume in their constituent's stocks, and you should never have a problem when making trades of $1 million or less.

The ETFOptimize strategies are unquestionably a breakthrough in the investment world – providing what legitimately may be the easiest way to attain substantial wealth through consistent compounding –  and with minimal risk. For investors, this can be the "Holy Grail" – a simple, proven investment approach that produces gains through both bull markets and bear markets alike.

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