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:

'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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark SPY (120.1%) in the period of the last 5 years, the total return of 63.4% of Enhanced Permanent Portfolio Strategy is lower, thus worse.
  • Looking at total return in of 43.8% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (65.1%).

CAGR:

'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:
  • Compared with the benchmark SPY (17.1%) in the period of the last 5 years, the annual return (CAGR) of 10.4% of Enhanced Permanent Portfolio Strategy is lower, thus worse.
  • Compared with SPY (18.3%) in the period of the last 3 years, the annual return (CAGR) of 12.9% is smaller, thus worse.

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 (17.6%) in the period of the last 5 years, the historical 30 days volatility of 8.9% of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • Compared with SPY (17.5%) in the period of the last 3 years, the 30 days standard deviation of 9.1% is lower, thus better.

DownVol:

'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 SPY (12.1%) in the period of the last 5 years, the downside volatility of 6.1% of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • Looking at downside volatility in of 6% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (11.6%).

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:
  • Compared with the benchmark SPY (0.83) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.89 of Enhanced Permanent Portfolio Strategy is higher, thus better.
  • Looking at risk / return profile (Sharpe) in of 1.14 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to SPY (0.9).

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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (1.21) in the period of the last 5 years, the downside risk / excess return profile of 1.29 of Enhanced Permanent Portfolio Strategy is higher, thus better.
  • During the last 3 years, the ratio of annual return and downside deviation is 1.74, which is larger, thus better than the value of 1.36 from the benchmark.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (8.48 ) in the period of the last 5 years, the Ulcer Ratio of 4.5 of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • Compared with SPY (5.31 ) in the period of the last 3 years, the Ulcer Ratio of 3.38 is lower, thus better.

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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (-24.5 days) in the period of the last 5 years, the maximum drop from peak to valley of -14.9 days of Enhanced Permanent Portfolio Strategy is greater, thus better.
  • Compared with SPY (-18.8 days) in the period of the last 3 years, the maximum reduction from previous high of -11.6 days is higher, 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) in days.'

Applying this definition to our asset in some examples:
  • Looking at the maximum days under water of 564 days in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively larger, thus worse in comparison to the benchmark SPY (488 days)
  • Looking at maximum time in days below previous high water mark in of 226 days in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to SPY (199 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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (120 days) in the period of the last 5 years, the average days under water of 151 days of Enhanced Permanent Portfolio Strategy is larger, thus worse.
  • Looking at average days below previous high in of 50 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (47 days).

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

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 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.