4-3-2-1 Dragon
30% SPY, 10% AVUV, 30% KMLM, 20% ZROZ, 10% GLD. Rebalance quarterly; 1.5x and 2x variants use capital-efficient or 3x ETFs. Backtest max drawdown: -19.8%.
Strategy & methodology
30% SPY, 10% AVUV, 30% KMLM, 20% ZROZ, 10% GLD; Rebalance quarterly; 1.5x and 2x variants use capital-efficient or 3x ETFs; Differs from Cole's 2020 paper: see deviations table below.
- Strategy type:
- Fixed allocation
- Rebalance frequency:
- Quarterly
- Original publication:
- 2020-10-01; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-01.
Simulated history
Stand-in funds and until when (4)
- KMLM: RYMFX x1.2 before Dec 2, 2020
- AVUV: DFSVX before Sep 26, 2019
- ZROZ: TLT x1.4 before Nov 4, 2009
- SPY: VFINX before Jan 29, 1993
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
30% SPY, 10% AVUV, 30% KMLM, 20% ZROZ, 10% GLD. Rebalance quarterly; 1.5x and 2x variants use capital-efficient or 3x ETFs. Backtest max drawdown: -19.8%. This is a fixed-allocation portfolio. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The quarterly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version 01cf4082, published 2026-10-01
Is 4-3-2-1 Dragon still working in 2026?
4-3-2-1 Dragon returned 10.91% over the trailing 12 months and 36.69% over 36 months through 2026-10-01, compared with a full-backtest annualized return of 9.29%. Its full-backtest maximum drawdown was -19.83%. The full sample contains 10320 daily NAV observations from 1986-06-30. These are model results, not investor account returns or a promise. As of 2026-10-01 it is -2.11% below its high-water mark of 2026-09-21, 10 days ago, and its longest run below a previous high was 2.2 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 10.91% | Not annualized | -4.61% | 252 | 2025-10-01 to 2026-10-01 |
| Trailing 36 months | 36.69% | Not annualized | -10.61% | 754 | 2023-09-29 to 2026-10-01 |
| Full backtest | 3471.10% | 9.29% | -19.83% | 10320 | 1986-06-30 to 2026-10-01 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
Its last high-water mark was 2026-09-21, 10 days before 2026-10-01, and it is -2.11% below that level now. The longest run below a previous high in the full backtest was 2.2 years. Recovering from a drawdown can take years, and a strong trailing return does not mean a past high has been regained.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
4-3-2-1 Dragon at a glance
4-3-2-1 Dragon is a fixed-allocation portfolio by Community Research across US Equity, US Small-Cap Value, Managed Futures, Long Zero-Coupon Treasuries, rebalanced quarterly. Backtested 1986-06-30 to 2026-10-01 (40.3 years): 9.3% CAGR, 1.18 Sharpe, -19.8% max drawdown, 7.7% volatility.
- Type
- Fixed Allocation
- Author
- Community Research
- Rebalancing
- Quarterly
- Risk
- Moderate
- Period
- 1986-06-30 to 2026-10-01
- CAGR
- 9.3%
- Sharpe
- 1.18
- Max Drawdown
- -19.8%
- Volatility
- 7.7%
4-3-2-1 Dragon — Fixed Allocation Portfolio
The 4-3-2-1 Dragon is the community's retail-friendly distillation of Chris Cole's Dragon Portfolio (Artemis Capital, 2020). Cole's original allocation is 24% Equity, 18% Fixed Income, 19% Gold, 18% Commodity Trend, and 21% Active Long Volatility. The Active Long Volatility sleeve uses long-dated equity options and tail-risk strategies that are not available in a retail ETF wrapper, so the community substituted a larger managed-futures sleeve and a small-cap value tilt that approximates the regime diversification at the cost of giving up the explicit long-vol exposure.
This implementation runs 30% SPY, 10% AVUV (small-cap value), 30% KMLM (managed futures for crisis alpha), 20% ZROZ (long zero-coupon treasuries), and 10% GLD. Quarterly rebalance. Variants include a 1.5x capital-efficient version using NTSX/GDE substitutions, and a 2x leveraged version using UPRO/TMF/UGL.
4-3-2-1 Dragon: frequently asked questions
- What is 4-3-2-1 Dragon?
- Multi-asset all-weather allocation inspired by the Artemis Dragon Portfolio: equities + small cap value + managed futures + long zero-coupon treasuries + gold. The 4-3-2-1 ratio balances growth and crisis alpha.
- Who created the 4-3-2-1 Dragon strategy?
- 4-3-2-1 Dragon was developed by Community Research. It is based on Cole, C. (2020). The Allegory of the Hawk and Serpent. Artemis Capital Management..
- What is the historical return and maximum drawdown of 4-3-2-1 Dragon?
- Backtested from 1986-06-30 to 2026-10-01, 4-3-2-1 Dragon returned 9.3% CAGR with a -19.8% maximum drawdown and a Sharpe ratio of 1.18. Past performance does not guarantee future results.
- How often is 4-3-2-1 Dragon rebalanced?
- 4-3-2-1 Dragon is rebalanced quarterly. BestFolio publishes the updated allocation signal each period.
- Is 4-3-2-1 Dragon a fixed or tactical strategy?
- 4-3-2-1 Dragon is a fixed-allocation (strategic) portfolio: it holds a set allocation and rebalances on schedule rather than rotating based on market signals.
Backtest Performance (1986-06-30 to 2026-10-01)
| Metric | 4-3-2-1 Dragon |
|---|---|
| CAGR | 9.3% |
| Max Drawdown | -19.8% |
| Sharpe | 1.18 |
| Sortino | 2.13 |
| Volatility | 7.7% |
| Calmar | 0.47 |
| Total Return | 3471.1% |
| Backtest Period | 40.3 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
Strategy Details
- Type
- Fixed / Strategic
- Rebalancing
- quarterly
- Risk Level
- moderate
- Variants
- 3
- Author
- Community Research
- Source
- Cole, C. (2020). The Allegory of the Hawk and Serpent. Artemis Capital Management.
Asset Classes
- US Equity
- US Small-Cap Value
- Managed Futures
- Long Zero-Coupon Treasuries
- Gold
Further reading
Holding 4-3-2-1 Dragon alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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