U.S. Style Rotation

THE MORNINGSTAR STYLE BOX WAS INTRODUCED IN 1992 AS A WAY TO HELP ADVISORS AND INVESTORS CLASSIFY FUNDS BASED UPON INVESTMENT GROWTH, VALUE AND SIZE FACTORS.

Strategy Description

During the market cycle, different style box ETFs perform better than others.  The U.S. Style Rotation model uses a rules-based approach to determine the top two styles to invest in each month.

During down markets, the model uses our “downside risk protector” to invest in cash or short-term securities.  This allows for growth potential while managing risk.

The model rebalances monthly.

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.

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