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.'

Using this definition on our asset we see for example:- Looking at the total return of 66.7% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (24.3%)
- Looking at total return in of 36.5% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (17.6%).

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Which means for our asset as example:- Looking at the annual performance (CAGR) of 10.8% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (4.5%)
- During the last 3 years, the compounded annual growth rate (CAGR) is 10.9%, which is greater, thus better than the value of 5.6% from the benchmark.

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Applying this definition to our asset in some examples:- The 30 days standard deviation over 5 years of BUG Permanent Portfolio Strategy is 7%, which is larger, thus worse compared to the benchmark AGG (4.6%) in the same period.
- Looking at volatility in of 8.2% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (5.3%).

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark AGG (3.5%) in the period of the last 5 years, the downside deviation of 5.2% of BUG Permanent Portfolio Strategy is higher, thus worse.
- Looking at downside risk in of 6.3% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (4.1%).

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (0.42) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.18 of BUG Permanent Portfolio Strategy is higher, thus better.
- During the last 3 years, the risk / return profile (Sharpe) is 1.03, which is greater, thus better than the value of 0.57 from the benchmark.

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Which means for our asset as example:- Compared with the benchmark AGG (0.56) in the period of the last 5 years, the excess return divided by the downside deviation of 1.58 of BUG Permanent Portfolio Strategy is greater, thus better.
- Compared with AGG (0.74) in the period of the last 3 years, the ratio of annual return and downside deviation of 1.34 is greater, 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 Downside risk index over 5 years of BUG Permanent Portfolio Strategy is 2.49 , which is higher, thus worse compared to the benchmark AGG (1.62 ) in the same period.
- Looking at Ulcer Ratio in of 3.01 in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (1.57 ).

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:- Compared with the benchmark AGG (-9.6 days) in the period of the last 5 years, the maximum drop from peak to valley of -18.6 days of BUG Permanent Portfolio Strategy is lower, thus worse.
- During the last 3 years, the maximum drop from peak to valley is -18.6 days, which is lower, thus worse than the value of -9.6 days from the benchmark.

'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:- Compared with the benchmark AGG (331 days) in the period of the last 5 years, the maximum days under water of 247 days of BUG Permanent Portfolio Strategy is lower, thus better.
- During the last 3 years, the maximum days below previous high is 247 days, which is lower, thus better than the value of 331 days from the benchmark.

'The Average 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. 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.'

Which means for our asset as example:- The average time in days below previous high water mark over 5 years of BUG Permanent Portfolio Strategy is 48 days, which is lower, thus better compared to the benchmark AGG (94 days) in the same period.
- During the last 3 years, the average time in days below previous high water mark is 61 days, which is lower, thus better than the value of 93 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.