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 is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or performance of 62% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (23.4%)
  • During the last 3 years, the total return, or performance is 34.3%, which is higher, thus better than the value of 16.7% from the benchmark.

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 AGG (4.3%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 10.1% of BUG Permanent Portfolio Strategy is higher, thus better.
  • Looking at annual performance (CAGR) in of 10.3% in the period of the last 3 years, we see it is relatively greater, thus better in comparison to AGG (5.3%).

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 AGG (4.6%) in the period of the last 5 years, the historical 30 days volatility of 6.9% of BUG Permanent Portfolio Strategy is larger, thus worse.
  • Compared with AGG (5.4%) in the period of the last 3 years, the volatility of 8.2% is greater, thus worse.

DownVol:

'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.'

Which means for our asset as example:
  • The downside risk over 5 years of BUG Permanent Portfolio Strategy is 5.2%, which is higher, thus worse compared to the benchmark AGG (3.5%) in the same period.
  • During the last 3 years, the downside deviation is 6.3%, which is greater, thus worse than the value of 4.1% from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The risk / return profile (Sharpe) over 5 years of BUG Permanent Portfolio Strategy is 1.1, which is higher, thus better compared to the benchmark AGG (0.39) in the same period.
  • During the last 3 years, the risk / return profile (Sharpe) is 0.96, which is higher, thus better than the value of 0.52 from the benchmark.

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:
  • The downside risk / excess return profile over 5 years of BUG Permanent Portfolio Strategy is 1.46, which is greater, thus better compared to the benchmark AGG (0.52) in the same period.
  • Compared with AGG (0.68) in the period of the last 3 years, the downside risk / excess return profile of 1.25 is larger, thus better.

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:
  • The Downside risk index over 5 years of BUG Permanent Portfolio Strategy is 2.49 , which is greater, thus worse compared to the benchmark AGG (1.62 ) in the same period.
  • During the last 3 years, the Ulcer Ratio is 3.02 , which is larger, thus worse than the value of 1.57 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The maximum reduction from previous high over 5 years of BUG Permanent Portfolio Strategy is -18.6 days, which is lower, thus worse compared to the benchmark AGG (-9.6 days) in the same period.
  • During the last 3 years, the maximum reduction from previous high is -18.6 days, which is lower, thus worse than the value of -9.6 days from the benchmark.

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 below previous high over 5 years of BUG Permanent Portfolio Strategy is 247 days, which is lower, thus better compared to the benchmark AGG (331 days) in the same period.
  • During the last 3 years, the maximum days under water is 247 days, which is lower, thus better than the value of 331 days from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark AGG (94 days) in the period of the last 5 years, the average time in days below previous high water mark of 48 days of BUG Permanent Portfolio Strategy is smaller, thus better.
  • Looking at average days under water in of 60 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (92 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 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.