Fixed-Income Allocation. We view bond asset classes as tools for risk balancing rather than speculative instruments. The riskiest fund in this category is the emerging market government bond ETF, which has a duration of over six years. It is followed in terms of risk by the U.S. high-yield bond fund, though neither is frequently included in our portfolios. The other two bond ETFs feature low durations (under 2.6 years, resulting in minimal interest rate risk) and investment-grade credit ratings (low credit risk), carrying no currency risk outside of the U.S. dollar. One of these - the 0–1 Year Treasury Bond ETF - is deployed during periods of market stress when higher-risk alternatives offer low expected returns.

Alternative Investments & the IskraIndex. Unlike many portfolio modeling services that exclude alternative investment segments - particularly commodities, due to their poor performance over recent decades - the IskraIndex methodology enables the assessment of their expected returns for comprehensive optimization alongside other asset classes. The core premise of the IskraIndex is that an asset's risk must be compensated by its returns, and that the negative trend in the commodities sector will inevitably reverse. The IskraIndex swiftly integrates new asset classes into its optimization framework as soon as corresponding ETFs become available. Notably, cryptocurrencies have emerged as a significant new asset class; following the introduction of crypto ETFs in 2024, they are now fully included within the IskraIndex optimization scope.

Defensive Rebalancing. During certain periods—even in the absence of market stress - our model may allocate 100% of the portfolio to bond ETFs. This shift is typically driven by the extreme overvaluation of riskier asset classes.