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, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Applying this definition to our asset in some examples:- Looking at the total return, or performance of 51.4% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (16.8%)
- Looking at total return, or increase in value in of 36.1% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (18.3%).

'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.'

Using this definition on our asset we see for example:- The compounded annual growth rate (CAGR) over 5 years of BUG Permanent Portfolio Strategy is 8.7%, which is larger, thus better compared to the benchmark AGG (3.2%) in the same period.
- During the last 3 years, the annual return (CAGR) is 10.8%, which is larger, thus better than the value of 5.8% 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.'

Using this definition on our asset we see for example:- Compared with the benchmark AGG (4.6%) in the period of the last 5 years, the historical 30 days volatility of 7.3% of BUG Permanent Portfolio Strategy is greater, thus worse.
- Looking at volatility in of 8.7% in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to AGG (5.5%).

'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:- The downside deviation over 5 years of BUG Permanent Portfolio Strategy is 5.6%, which is larger, thus worse compared to the benchmark AGG (3.5%) in the same period.
- Looking at downside risk in of 6.6% in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (4.2%).

'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.'

Which means for our asset as example:- The ratio of return and volatility (Sharpe) over 5 years of BUG Permanent Portfolio Strategy is 0.84, which is higher, thus better compared to the benchmark AGG (0.14) in the same period.
- Compared with AGG (0.6) in the period of the last 3 years, the Sharpe Ratio of 0.96 is larger, thus better.

'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.'

Using this definition on our asset we see for example:- The excess return divided by the downside deviation over 5 years of BUG Permanent Portfolio Strategy is 1.11, which is larger, thus better compared to the benchmark AGG (0.19) in the same period.
- Looking at downside risk / excess return profile in of 1.26 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (0.78).

'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:- Compared with the benchmark AGG (1.8 ) in the period of the last 5 years, the Ulcer Index of 2.57 of BUG Permanent Portfolio Strategy is greater, thus worse.
- Looking at Ulcer Ratio in of 2.71 in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (1.48 ).

'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.'

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

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (331 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 247 days of BUG Permanent Portfolio Strategy is lower, thus better.
- During the last 3 years, the maximum time in days below previous high water mark is 100 days, which is lower, thus better than the value of 247 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:- Looking at the average days under water of 51 days in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively lower, thus better in comparison to the benchmark AGG (104 days)
- Looking at average days below previous high in of 31 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (60 days).

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.