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)

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:- Compared with the benchmark AGG (-0.5%) in the period of the last 5 years, the total return, or performance of 51.5% of BUG Permanent Portfolio Strategy is larger, thus better.
- During the last 3 years, the total return, or increase in value is 13.6%, which is greater, thus better than the value of -16.1% 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.'

Using this definition on our asset we see for example:- Looking at the annual return (CAGR) of 8.7% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (-0.1%)
- Compared with AGG (-5.7%) in the period of the last 3 years, the annual return (CAGR) of 4.3% is greater, thus better.

'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.'

Applying this definition to our asset in some examples:- The volatility over 5 years of BUG Permanent Portfolio Strategy is 8.7%, which is greater, thus worse compared to the benchmark AGG (6.3%) in the same period.
- Compared with AGG (6.3%) in the period of the last 3 years, the historical 30 days volatility of 7.1% is greater, thus worse.

'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:- The downside deviation over 5 years of BUG Permanent Portfolio Strategy is 6.5%, which is larger, thus worse compared to the benchmark AGG (4.7%) in the same period.
- Compared with AGG (4.6%) in the period of the last 3 years, the downside risk of 5.1% is greater, thus worse.

'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:- Compared with the benchmark AGG (-0.41) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 0.72 of BUG Permanent Portfolio Strategy is higher, thus better.
- Compared with AGG (-1.31) in the period of the last 3 years, the ratio of return and volatility (Sharpe) of 0.26 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.'

Applying this definition to our asset in some examples:- Looking at the excess return divided by the downside deviation of 0.96 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (-0.55)
- Compared with AGG (-1.79) in the period of the last 3 years, the ratio of annual return and downside deviation of 0.36 is larger, thus better.

'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 Ulcer Index of 4.75 in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively smaller, thus better in comparison to the benchmark AGG (7.49 )
- Compared with AGG (9.33 ) in the period of the last 3 years, the Ulcer Index of 5.41 is lower, thus better.

'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 (-18.4 days) in the period of the last 5 years, the maximum DrawDown of -19.3 days of BUG Permanent Portfolio Strategy is lower, thus worse.
- Compared with AGG (-18.1 days) in the period of the last 3 years, the maximum reduction from previous high 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). 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 (796 days) in the period of the last 5 years, the maximum days under water of 439 days of BUG Permanent Portfolio Strategy is smaller, thus better.
- Compared with AGG (692 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 439 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.'

Using this definition on our asset we see for example:- The average days under water over 5 years of BUG Permanent Portfolio Strategy is 103 days, which is lower, thus better compared to the benchmark AGG (283 days) in the same period.
- During the last 3 years, the average days below previous high is 149 days, which is lower, thus better than the value of 323 days from the benchmark.

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.