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)

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Which means for our asset as example:- The total return, or increase in value over 5 years of BUG Permanent Portfolio Strategy is 61%, which is greater, thus better compared to the benchmark AGG (0%) in the same period.
- Looking at total return in of 11.5% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (-8%).

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:- Looking at the compounded annual growth rate (CAGR) of 10% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (0%)
- Compared with AGG (-2.8%) in the period of the last 3 years, the annual performance (CAGR) of 3.7% is greater, thus better.

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:- The volatility over 5 years of BUG Permanent Portfolio Strategy is 8.7%, which is greater, thus worse compared to the benchmark AGG (6.7%) in the same period.
- During the last 3 years, the 30 days standard deviation is 6.3%, which is smaller, thus better than the value of 6.9% 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.'

Applying this definition to our asset in some examples:- The downside risk over 5 years of BUG Permanent Portfolio Strategy is 6.5%, which is larger, thus worse compared to the benchmark AGG (5%) in the same period.
- Compared with AGG (4.9%) in the period of the last 3 years, the downside deviation of 4.5% is smaller, thus better.

'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 Sharpe Ratio of 0.86 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (-0.37)
- Compared with AGG (-0.76) in the period of the last 3 years, the risk / return profile (Sharpe) of 0.19 is higher, thus better.

'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.'

Using this definition on our asset we see for example:- The downside risk / excess return profile over 5 years of BUG Permanent Portfolio Strategy is 1.16, which is larger, thus better compared to the benchmark AGG (-0.5) in the same period.
- Looking at downside risk / excess return profile in of 0.26 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-1.07).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (8.84 ) in the period of the last 5 years, the Ulcer Ratio of 4.91 of BUG Permanent Portfolio Strategy is lower, thus better.
- Compared with AGG (11 ) in the period of the last 3 years, the Downside risk index of 5.66 is smaller, thus better.

'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:- Looking at the maximum DrawDown of -19.3 days in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively lower, thus worse in comparison to the benchmark AGG (-18.4 days)
- During the last 3 years, the maximum DrawDown is -11 days, which is larger, thus better than the value of -17.8 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 (974 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 545 days of BUG Permanent Portfolio Strategy is lower, thus better.
- During the last 3 years, the maximum days under water is 545 days, which is smaller, thus better than the value of 723 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:- Looking at the average days below previous high of 147 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 (401 days)
- Compared with AGG (351 days) in the period of the last 3 years, the average time in days below previous high water mark of 215 days is lower, thus better.

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 and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.