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)

'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:- Looking at the total return, or performance of 65.5% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (0.4%)
- During the last 3 years, the total return is 10.3%, which is larger, thus better than the value of -8.4% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The compounded annual growth rate (CAGR) over 5 years of BUG Permanent Portfolio Strategy is 10.6%, which is larger, thus better compared to the benchmark AGG (0.1%) in the same period.
- Looking at compounded annual growth rate (CAGR) in of 3.3% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (-2.9%).

'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.'

Using this definition on our asset we see for example:- The volatility over 5 years of BUG Permanent Portfolio Strategy is 8.7%, which is larger, thus worse compared to the benchmark AGG (6.7%) in the same period.
- During the last 3 years, the 30 days standard deviation is 6.2%, which is smaller, thus better than the value of 6.8% 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:- Compared with the benchmark AGG (4.9%) in the period of the last 5 years, the downside risk of 6.4% of BUG Permanent Portfolio Strategy is larger, thus worse.
- Looking at downside risk in of 4.5% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to AGG (4.9%).

'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:- Looking at the Sharpe Ratio of 0.94 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (-0.36)
- Compared with AGG (-0.79) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.13 is larger, 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.'

Which means for our asset as example:- Looking at the ratio of annual return and downside deviation of 1.26 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (-0.49)
- Looking at downside risk / excess return profile in of 0.19 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (-1.1).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (8.72 ) in the period of the last 5 years, the Downside risk index of 4.91 of BUG Permanent Portfolio Strategy is lower, thus better.
- Looking at Downside risk index in of 5.66 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (11 ).

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (-18.4 days) in the period of the last 5 years, the maximum drop from peak to valley of -19.3 days of BUG Permanent Portfolio Strategy is smaller, thus worse.
- 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 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.'

Using this definition on our asset we see for example:- Looking at the maximum time in days below previous high water mark of 545 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 (953 days)
- Compared with AGG (702 days) in the period of the last 3 years, the maximum days below previous high of 545 days is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (388 days) in the period of the last 5 years, the average days under water of 148 days of BUG Permanent Portfolio Strategy is smaller, thus better.
- Looking at average time in days below previous high water mark in of 215 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to AGG (334 days).

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.