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:- The total return over 5 years of BUG Permanent Portfolio Strategy is 52.8%, which is larger, thus better compared to the benchmark AGG (5.2%) in the same period.
- Looking at total return, or increase in value in of 49.9% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (-3.7%).

'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 performance (CAGR) of 8.9% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (1%)
- Looking at annual performance (CAGR) in of 14.4% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (-1.3%).

'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.'

Using this definition on our asset we see for example:- Looking at the volatility of 8.6% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus worse in comparison to the benchmark AGG (6%)
- During the last 3 years, the historical 30 days volatility is 8.5%, which is larger, thus worse than the value of 6% from the benchmark.

'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 (4.4%) in the period of the last 5 years, the downside deviation of 6.4% of BUG Permanent Portfolio Strategy is larger, thus worse.
- Compared with AGG (4.1%) in the period of the last 3 years, the downside volatility of 5.8% is larger, thus worse.

'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:- Compared with the benchmark AGG (-0.25) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.74 of BUG Permanent Portfolio Strategy is higher, thus better.
- Looking at risk / return profile (Sharpe) in of 1.41 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (-0.63).

'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:- Compared with the benchmark AGG (-0.33) in the period of the last 5 years, the excess return divided by the downside deviation of 0.99 of BUG Permanent Portfolio Strategy is larger, thus better.
- During the last 3 years, the ratio of annual return and downside deviation is 2.07, which is greater, thus better than the value of -0.91 from the benchmark.

'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.'

Which means for our asset as example:- Looking at the Downside risk index of 4.34 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively lower, thus better in comparison to the benchmark AGG (6.14 )
- Compared with AGG (7.87 ) in the period of the last 3 years, the Downside risk index of 4.78 is smaller, thus better.

'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.'

Using this definition on our asset we see for example:- Looking at the maximum reduction from previous high of -19.3 days in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark AGG (-18.4 days)
- Compared with AGG (-18.4 days) in the period of the last 3 years, the maximum drop from peak to valley of -11 days is greater, thus better.

'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:- Compared with the benchmark AGG (662 days) in the period of the last 5 years, the maximum days under water of 305 days of BUG Permanent Portfolio Strategy is smaller, thus better.
- Looking at maximum days under water in of 305 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (662 days).

'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:- Compared with the benchmark AGG (201 days) in the period of the last 5 years, the average days under water of 71 days of BUG Permanent Portfolio Strategy is smaller, thus better.
- Compared with AGG (306 days) in the period of the last 3 years, the average days below previous high of 83 days is smaller, thus better.

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, 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.