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.'

Which means for our asset as example:
  • The total return over 5 years of BUG Permanent Portfolio Strategy is 61%, which is larger, thus better compared to the benchmark AGG (2.2%) in the same period.
  • Compared with AGG (-9.5%) in the period of the last 3 years, the total return, or performance of 8.7% is larger, 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.'

Which means for our asset as example:
  • Looking at the annual return (CAGR) of 10% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (0.4%)
  • Looking at compounded annual growth rate (CAGR) in of 2.8% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (-3.3%).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (6.6%) in the period of the last 5 years, the historical 30 days volatility of 8.6% of BUG Permanent Portfolio Strategy is larger, thus worse.
  • Compared with AGG (6.7%) in the period of the last 3 years, the 30 days standard deviation of 6.6% is lower, thus better.

DownVol:

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

Which means for our asset as example:
  • Compared with the benchmark AGG (4.9%) in the period of the last 5 years, the downside volatility of 6.4% of BUG Permanent Portfolio Strategy is higher, thus worse.
  • Looking at downside deviation in of 4.7% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (4.8%).

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.'

Using this definition on our asset we see for example:
  • The ratio of return and volatility (Sharpe) over 5 years of BUG Permanent Portfolio Strategy is 0.87, which is larger, thus better compared to the benchmark AGG (-0.31) in the same period.
  • During the last 3 years, the risk / return profile (Sharpe) is 0.05, which is greater, thus better than the value of -0.86 from the benchmark.

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.'

Which means for our asset as example:
  • Compared with the benchmark AGG (-0.43) in the period of the last 5 years, the downside risk / excess return profile of 1.17 of BUG Permanent Portfolio Strategy is greater, thus better.
  • Looking at downside risk / excess return profile in of 0.07 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (-1.2).

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (8.36 ) in the period of the last 5 years, the Ulcer Ratio of 4.91 of BUG Permanent Portfolio Strategy is lower, thus better.
  • Compared with AGG (10 ) in the period of the last 3 years, the Ulcer Index of 5.67 is lower, thus better.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Applying this definition to our asset in some examples:
  • The maximum drop from peak to valley over 5 years of BUG Permanent Portfolio Strategy is -19.3 days, which is smaller, thus worse compared to the benchmark AGG (-18.4 days) in the same period.
  • Compared with AGG (-17.8 days) in the period of the last 3 years, the maximum DrawDown of -11 days is greater, 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.'

Which means for our asset as example:
  • The maximum days under water over 5 years of BUG Permanent Portfolio Strategy is 539 days, which is lower, thus better compared to the benchmark AGG (896 days) in the same period.
  • Looking at maximum days under water in of 539 days in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to AGG (645 days).

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.'

Which means for our asset as example:
  • Looking at the average days below previous high of 144 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 (349 days)
  • During the last 3 years, the average days under water is 209 days, which is lower, thus better than the value of 284 days from the benchmark.

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 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.