Strategy Description
The model ranks 14 ETFs in different asset classes including: U.S. stocks, International and Emerging Markets, Real Estate, Commodities, Gold, U.S. Treasuries, Corporate, High Yield, and International bonds.
Focus Four uses a dual-ranking system based on the underlying risk of the asset class. This process helps to reduce the volatilty of the model. The ETFs are separated by risk, then ranked. The top ETFs from each system are chosen for investment.
Using our Downside Risk Protector©, the model will move into cash or short-term securities during down markets which helps minimize risk and maximize gains.
Definitions
Sharpe Ratio – the average return earned in excess of the risk-free rate. A higher Sharpe Ratio is better
Risk-Free Rate – represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
Sortino Ratio – another measure of risk that takes into account the downside deviation of the asset. A higher Sortino Ratio is better.
What is drawdown?
Drawdown is the measure from the highest high to the lowest low or peak to trough during a specific time period. It is an important measurement of risk. A larger drawdown requires a more significant increase in the security to recover.
