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, 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.'

Using this definition on our asset we see for example:
  • The total return, or increase in value over 5 years of Enhanced Permanent Portfolio Strategy is 64.3%, which is smaller, thus worse compared to the benchmark SPY (86.2%) in the same period.
  • Looking at total return, or performance in of 35.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (42.1%).

CAGR:

'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:
  • Compared with the benchmark SPY (13.2%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 10.4% of Enhanced Permanent Portfolio Strategy is lower, thus worse.
  • Looking at annual performance (CAGR) in of 10.6% in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to SPY (12.4%).

Volatility:

'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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (18.8%) in the period of the last 5 years, the historical 30 days volatility of 8.3% of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • Compared with SPY (22.5%) in the period of the last 3 years, the historical 30 days volatility of 9.4% is lower, 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (13.7%) in the period of the last 5 years, the downside volatility of 6.1% of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • During the last 3 years, the downside deviation is 7.1%, which is smaller, thus better than the value of 16.5% from the benchmark.

Sharpe:

'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:
  • Compared with the benchmark SPY (0.57) in the period of the last 5 years, the Sharpe Ratio of 0.96 of Enhanced Permanent Portfolio Strategy is larger, thus better.
  • Looking at Sharpe Ratio in of 0.86 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.44).

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Applying this definition to our asset in some examples:
  • Looking at the excess return divided by the downside deviation of 1.31 in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (0.78)
  • Compared with SPY (0.6) in the period of the last 3 years, the excess return divided by the downside deviation of 1.15 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (5.81 ) in the period of the last 5 years, the Ulcer Index of 3.17 of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • Looking at Ulcer Ratio in of 3.73 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (7.12 ).

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:
  • Compared with the benchmark SPY (-33.7 days) in the period of the last 5 years, the maximum reduction from previous high of -17.4 days of Enhanced Permanent Portfolio Strategy is greater, thus better.
  • During the last 3 years, the maximum drop from peak to valley is -17.4 days, which is larger, thus better than the value of -33.7 days from the benchmark.

MaxDuration:

'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.'

Using this definition on our asset we see for example:
  • Looking at the maximum days below previous high of 289 days in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively greater, thus worse in comparison to the benchmark SPY (139 days)
  • Looking at maximum time in days below previous high water mark in of 289 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (139 days).

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:
  • The average time in days below previous high water mark over 5 years of Enhanced Permanent Portfolio Strategy is 57 days, which is larger, thus worse compared to the benchmark SPY (37 days) in the same period.
  • Looking at average time in days below previous high water mark in of 78 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (45 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.