Description

The classic permanent portfolio was created by Harry Browne. The idea was that a portfolio should be diversified enough to get you through a wide variety of economic and market environments and simple enough that even a child could do it. Originally it consisted of the following allocations:

  • 25% in U.S. stocks
  • 25% in long-term bonds
  • 25% in gold
  • 25% in cash

The Logical Invest permanent portfolio is somewhat more sophisticated, rebalances monthly and is not always split evenly across the three main assets. It can adapt to market conditions by putting more weight on gold or treasuries and less on equity depending on market conditions.

Methodology & Assets
  • US Market (SPY: S&P 500 SPDRs)
  • Long Duration Treasuries (TLT: iShares 20+ Year Treasury Bond)
  • Gold (GLD: Gold Shares SPDR)

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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:
  • Compared with the benchmark SPY (122.7%) in the period of the last 5 years, the total return, or performance of 55.9% of Enhanced Permanent Portfolio Strategy is lower, thus worse.
  • Looking at total return, or performance in of 39.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (65.3%).

CAGR:

'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:
  • Compared with the benchmark SPY (17.4%) in the period of the last 5 years, the annual performance (CAGR) of 9.3% of Enhanced Permanent Portfolio Strategy is lower, thus worse.
  • During the last 3 years, the annual return (CAGR) is 11.7%, which is smaller, thus worse than the value of 18.2% from the benchmark.

Volatility:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (18.7%) in the period of the last 5 years, the volatility of 8.6% of Enhanced Permanent Portfolio Strategy is smaller, thus better.
  • Compared with SPY (22.5%) in the period of the last 3 years, the historical 30 days volatility of 9.7% is smaller, thus better.

DownVol:

'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 SPY (13.6%) in the period of the last 5 years, the downside risk of 6.3% of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • During the last 3 years, the downside volatility is 7.1%, which is smaller, thus better than the value of 16.3% from the benchmark.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Which means for our asset as example:
  • The ratio of return and volatility (Sharpe) over 5 years of Enhanced Permanent Portfolio Strategy is 0.8, which is higher, thus better compared to the benchmark SPY (0.8) in the same period.
  • Looking at Sharpe Ratio in of 0.95 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to SPY (0.7).

Sortino:

'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 excess return divided by the downside deviation over 5 years of Enhanced Permanent Portfolio Strategy is 1.08, which is lower, thus worse compared to the benchmark SPY (1.1) in the same period.
  • Compared with SPY (0.96) in the period of the last 3 years, the excess return divided by the downside deviation of 1.29 is higher, thus better.

Ulcer:

'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:
  • Looking at the Downside risk index of 3.36 in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (5.58 )
  • Looking at Ulcer Ratio in of 3.15 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (6.83 ).

MaxDD:

'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.'

Which means for our asset as example:
  • Looking at the maximum drop from peak to valley of -17.4 days in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark SPY (-33.7 days)
  • Compared with SPY (-33.7 days) in the period of the last 3 years, the maximum drop from peak to valley of -17.4 days is larger, thus better.

MaxDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Applying this definition to our asset in some examples:
  • The maximum time in days below previous high water mark over 5 years of Enhanced Permanent Portfolio Strategy is 289 days, which is greater, thus worse compared to the benchmark SPY (139 days) in the same period.
  • During the last 3 years, the maximum days under water is 192 days, which is greater, thus worse than the value of 139 days from the benchmark.

AveDuration:

'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.'

Applying this definition to our asset in some examples:
  • Looking at the average days below previous high of 70 days in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively higher, thus worse in comparison to the benchmark SPY (33 days)
  • Looking at average time in days below previous high water mark in of 50 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (35 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations
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Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Enhanced 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.