The purpose of this Web page is to provide a quick example of the amazing performance of a new investment type created by the NAOI called Dynamic Investments (DIs) compared to the performance of a generic MPT-based, 60/40 asset allocation portfolio.

A Simple Dynamic Investment

To illustrate the power of DIs, let’s look at the simplest Dynamic Investment possible; one that rotates only between a Total Stock Market ETF and a Total Bond Market ETF based on a Quarterly Review of the price trends of each. Only the ETF that is trending up most strongly when sampled is purchased by the DI, or retained if already owned, and held until the next Quarterly Review. Thus, the Simple DI owns either 100% Stocks or 100% Bonds at any one time. It strives to hold ONLY uptrending equities at all times. In contrast, MPT portfolios are designed to hold both uptrending and down trending (i.e. uncorrelated) assets at all times in order to reduce risk - but this strategy also reduces returns.

A DI vs. MPT-Portfolio Performance Example

The table presented below shows the performance of the Simple DI described above as compared to a generic MPT-based portfolio that uses the same ETFs as the DI - a Total Stock ETF and a Total Bond ETF - with a 60% allocation to Stocks and a 40% allocation to Bonds. The backtest period is from the start of 2008 to the end of 2020. In the table you can view the results for both the DI and the MPT portfolio during the back-test period with the bottom two rows showing the Average Annual Returns for each investment type along with their Sharpe Ratios - a measure of risk and the higher the better.

During the back-test period you can see that the market suffered a major crash in 2008-2009 and an unprecedented Bull-Market run from 2010 to 2020, thus testing the performance of the two investment types in both up and down markets.

The data in this table shows that by being “market-sensitive” DIs can produce significantly higher returns than the static, buy-and-hold MPT portfolios that investors are given today. It produced remarkable returns in both “up” and “down” trending markets. And this performance is obtained with lower risk as indicated by the higher Sharpe Ratio in the bottom row.

Increasing Performance Still Higher

While the performance of the Simple DI is amazing, still higher returns - without added risk - are possible. The NAOI White Paper shows how, by adding just one more carefully selected and tested ETF to the Simple DI’s purchase choices, its average annual return for the same test period increased to +23% with a Sharpe Ratio well above 1.00.

Dynamic Investments usher in a world of simpler, higher-performance, lower-risk investment types. The NAOI White Paper shows readers how DIs work and explains, step-by-step, how they can take take full advantage of these higher returns - with lower risk - immediately upon completion of the final page.