Description

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.

Methodology & Assets
  • 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)

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (21.7%) in the period of the last 5 years, the total return, or increase in value of 54.7% of BUG Permanent Portfolio Strategy is larger, thus better.
  • Compared with AGG (15%) in the period of the last 3 years, the total return, or increase in value of 28.8% is greater, thus better.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (4%) in the period of the last 5 years, the annual performance (CAGR) of 9.1% of BUG Permanent Portfolio Strategy is higher, thus better.
  • During the last 3 years, the annual return (CAGR) is 8.8%, which is larger, thus better than the value of 4.8% from the benchmark.

Volatility:

'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.'

Which means for our asset as example:
  • Looking at the 30 days standard deviation of 6.9% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively higher, thus worse in comparison to the benchmark AGG (4.6%)
  • Compared with AGG (5.4%) in the period of the last 3 years, the historical 30 days volatility of 8.1% is higher, thus worse.

DownVol:

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:
  • Looking at the downside volatility of 5.2% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus worse in comparison to the benchmark AGG (3.5%)
  • Compared with AGG (4.1%) in the period of the last 3 years, the downside volatility of 6.2% is larger, thus worse.

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Using this definition on our asset we see for example:
  • Looking at the ratio of return and volatility (Sharpe) of 0.97 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (0.32)
  • During the last 3 years, the risk / return profile (Sharpe) is 0.78, which is larger, thus better than the value of 0.42 from the benchmark.

Sortino:

'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.'

Which means for our asset as example:
  • The downside risk / excess return profile over 5 years of BUG Permanent Portfolio Strategy is 1.28, which is greater, thus better compared to the benchmark AGG (0.43) in the same period.
  • Compared with AGG (0.55) in the period of the last 3 years, the downside risk / excess return profile of 1.01 is higher, thus better.

Ulcer:

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Using this definition on our asset we see for example:
  • Looking at the Downside risk index of 2.49 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus worse in comparison to the benchmark AGG (1.62 )
  • Looking at Ulcer Index in of 3.02 in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to AGG (1.57 ).

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Which means for our asset as example:
  • Compared with the benchmark AGG (-9.6 days) in the period of the last 5 years, the maximum drop from peak to valley of -18.6 days of BUG Permanent Portfolio Strategy is smaller, thus worse.
  • Looking at maximum drop from peak to valley in of -18.6 days in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to AGG (-9.6 days).

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'

Which means for our asset as example:
  • 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 247 days, which is lower, thus better than the value of 331 days from the benchmark.

AveDuration:

'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.'

Using this definition on our asset we see for example:
  • Looking at the average days below previous high of 48 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 (93 days)
  • Compared with AGG (91 days) in the period of the last 3 years, the average days below previous high of 59 days is lower, thus better.

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 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.