The BUG strategy is one of our more conservative strategies. The strategy does not attempt to predict prices or the future state of the economy. It holds a broad diversified number of assets that complement each other, each performing well in a different economic environment such as inflation, deflation, growth and stagnation. It is meant for long term, steady growth and low risk.

It inherits part of its logic from Harry Browne's tried-and-true Permanent Portfolio and the publicized workings of the All-Weather portfolio.

The strategy has been updated (as of May 1st, 2020) to allocate 40%-60% to our HEDGE sub-strategy. The statistics below reflect the updated model.

- US Market (SPY: S&P 500 SPDRs)
- Long Duration Treasuries (TLT: iShares 20+ Year Treasury Bond)
- Gold (GLD: Gold Shares SPDR)
- Cash or equivalent (SHY: 1-3 Year Treasury Bonds)

- Convertible Bonds (CWB: SPDR Barclays Convertible Securities)
- Inflation Protected Treasuries (TIP: iShares TIPS Bond Fund)
- Foreign Bonds (PCY: PowerShares Emerging Markets Sovereign Bond)

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Which means for our asset as example:- Compared with the benchmark AGG (21.9%) in the period of the last 5 years, the total return, or performance of 68.3% of BUG Permanent Portfolio Strategy is larger, thus better.
- Looking at total return, or increase in value in of 28.6% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (17%).

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Using this definition on our asset we see for example:- Looking at the annual performance (CAGR) of 11% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (4%)
- Compared with AGG (5.4%) in the period of the last 3 years, the annual performance (CAGR) of 8.7% is greater, thus better.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:- Looking at the 30 days standard deviation of 7.2% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively higher, thus worse in comparison to the benchmark AGG (4.6%)
- During the last 3 years, the volatility is 8.6%, which is greater, thus worse than the value of 5.4% from the benchmark.

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Which means for our asset as example:- Compared with the benchmark AGG (3.5%) in the period of the last 5 years, the downside risk of 5.4% of BUG Permanent Portfolio Strategy is larger, thus worse.
- Looking at downside risk in of 6.6% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to AGG (4.1%).

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Applying this definition to our asset in some examples:- Looking at the ratio of return and volatility (Sharpe) of 1.18 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively higher, thus better in comparison to the benchmark AGG (0.34)
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.73, which is higher, thus better than the value of 0.53 from the benchmark.

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (0.45) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.58 of BUG Permanent Portfolio Strategy is higher, thus better.
- Compared with AGG (0.69) in the period of the last 3 years, the excess return divided by the downside deviation of 0.95 is larger, thus better.

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Which means for our asset as example:- The Ulcer Index over 5 years of BUG Permanent Portfolio Strategy is 2.51 , which is larger, thus worse compared to the benchmark AGG (1.63 ) in the same period.
- Compared with AGG (1.15 ) in the period of the last 3 years, the Downside risk index of 3.12 is larger, thus worse.

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (-9.6 days) in the period of the last 5 years, the maximum DrawDown of -18.6 days of BUG Permanent Portfolio Strategy is lower, thus worse.
- Compared with AGG (-9.6 days) in the period of the last 3 years, the maximum drop from peak to valley of -18.6 days is lower, thus worse.

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:- The maximum time in days below previous high water mark over 5 years of BUG Permanent Portfolio Strategy is 247 days, which is lower, thus better compared to the benchmark AGG (331 days) in the same period.
- During the last 3 years, the maximum days below previous high is 247 days, which is greater, thus worse than the value of 225 days from the benchmark.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Using this definition on our asset we see for example:- The average days under water over 5 years of BUG Permanent Portfolio Strategy is 49 days, which is lower, thus better compared to the benchmark AGG (98 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 64 days, which is higher, thus worse than the value of 58 days from the benchmark.

Historical returns have been extended using synthetic data.
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- Note that yearly returns do not equal the sum of monthly returns due to compounding.
- Performance results of BUG Permanent Portfolio Strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.