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 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 investmentâ€™s overall performance.'

Applying this definition to our asset in some examples:- Looking at the total return of 58.2% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus better in comparison to the benchmark AGG (21.4%)
- Compared with AGG (15.8%) in the period of the last 3 years, the total return, or increase in value of 29.6% is greater, thus better.

'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 compounded annual growth rate (CAGR) of 9.6% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively higher, thus better in comparison to the benchmark AGG (4%)
- During the last 3 years, the compounded annual growth rate (CAGR) is 9%, which is higher, thus better than the value of 5% from the benchmark.

'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:- Compared with the benchmark AGG (4.6%) in the period of the last 5 years, the historical 30 days volatility of 7.1% of BUG Permanent Portfolio Strategy is larger, thus worse.
- Looking at 30 days standard deviation in of 8.4% in the period of the last 3 years, we see it is relatively higher, thus worse in comparison to AGG (5.4%).

'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:- Compared with the benchmark AGG (3.5%) in the period of the last 5 years, the downside risk of 5.3% 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 6.5% is larger, 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.'

Using this definition on our asset we see for example:- Compared with the benchmark AGG (0.32) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.01 of BUG Permanent Portfolio Strategy is higher, thus better.
- Looking at ratio of return and volatility (Sharpe) in of 0.78 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to AGG (0.47).

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Using this definition on our asset we see for example:- Compared with the benchmark AGG (0.42) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.33 of BUG Permanent Portfolio Strategy is larger, thus better.
- Compared with AGG (0.61) in the period of the last 3 years, the excess return divided by the downside deviation of 1.01 is greater, 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:- The Downside risk index over 5 years of BUG Permanent Portfolio Strategy is 2.53 , which is higher, thus worse compared to the benchmark AGG (1.63 ) in the same period.
- Compared with AGG (1.41 ) in the period of the last 3 years, the Downside risk index of 3.07 is higher, thus worse.

'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:- The maximum DrawDown 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 DrawDown is -18.6 days, which is smaller, thus worse than the value of -9.6 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:- Compared with the benchmark AGG (331 days) in the period of the last 5 years, the maximum days below previous high of 247 days of BUG Permanent Portfolio Strategy is smaller, thus better.
- Compared with AGG (259 days) in the period of the last 3 years, the maximum days under water of 247 days is lower, thus better.

'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:- The average days below previous high over 5 years of BUG Permanent Portfolio Strategy is 49 days, which is lower, thus better compared to the benchmark AGG (94 days) in the same period.
- Compared with AGG (63 days) in the period of the last 3 years, the average days under water of 61 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.