Drawbridge Balanced

A strategy for investors seeking growth and income with principal protection. 

Strategy Description

The classic 60-40 portfolio has long been a staple of investors seeking a presumed balanced approach to investing.  Traditionally, 60% has been constructed using the U.S. Total market or S&P 500 and 40% has been constructed using intermediate U.S. Treasuries.   
 
The Drawbridge Balanced strategy is a new twist on this classic strategy.  Rather than hold the entire stock market, the strategy rotates among U.S. large-caps, U.S. mid-caps, U.S. small-caps, and International.  In a similar fashion, the strategy selects among the best fixed-income opportunities by rotating among treasuries and high yield bonds. 

Definitions

Sharpe Ratio – the average return earned in excess of the risk-free rate.  A higher Sharpe Ration 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.

Volatility measures the change in the price of an investment.  The higher the volatility, the higher the difference between the high and the low of an investment’s price.

The 12 Month Rolling ROR is the compound rate of return for the last 12 months.  The rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost.