Dynamic US Market Strategy
This strategy invests in the S&P® 500 index comprised of 500 leading publicly traded companies in the U.S., representing around 80% of the overall U.S. stock market. An S&P 500 index fund or like-fund is available in most investor accounts. The strategy, despite outperforming buy-and-hold investment portfolios, has had only a small number of trades per year, making it easy to follow.
The strategy will switch to the safety of government bonds or cash when performance of U.S or foreign markets turns down.
How does the strategy work?
The Dynamic US Market strategy is designed to hold stocks (SPY) when recent market performance is positive. However, when stock market strength weakens and prices begin to fall, this strategy will sell SPY and switch to a safer investment. Depending on market conditions, the safer investment will be either U.S. treasury bonds or cash. There are many different treasury bond indexes. The 7-10 year U.S. Treasury bond index was chosen (IEF) because of the intermediate term of the bonds it represents.
| Asset class | Strategy holding | Description |
|---|---|---|
| Stocks | SPY | S&P 500 large-cap U.S. Stocks |
| Government Bonds | IEF | 7-10 Year U.S. Treasury Bonds |
| Cash and cash equivalents | Cash | Cash held as United States dollars. |
Strategy Metrics
Metric Strategy Balanced portfolio
Annual Return (20 years) 9.5% 6.7%
Sharpe Ratio (20 years) 0.81 0.68
Max Drawdown -13.0% -32.6%
Drawdown Start / End dates December 2021 to September 2023 October 2007 to December 2010
Max Drawdown length 21 months 38 months
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