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.'

Using this definition on our asset we see for example:- Looking at the total return of 50.1% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (15.7%)
- During the last 3 years, the total return is 35.3%, which is larger, thus better than the value of 17.3% from the benchmark.

'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.'

Applying this definition to our asset in some examples:- The annual return (CAGR) over 5 years of BUG Permanent Portfolio Strategy is 8.5%, which is greater, thus better compared to the benchmark AGG (3%) in the same period.
- Compared with AGG (5.5%) in the period of the last 3 years, the annual performance (CAGR) of 10.6% is larger, thus better.

'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.'

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 30 days standard deviation of 7.3% of BUG Permanent Portfolio Strategy is greater, thus worse.
- Compared with AGG (5.5%) in the period of the last 3 years, the historical 30 days volatility of 8.7% is greater, thus worse.

'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:- Looking at the downside deviation of 5.5% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively higher, thus worse in comparison to the benchmark AGG (3.5%)
- During the last 3 years, the downside volatility is 6.6%, which is higher, thus worse than the value of 4.2% from the benchmark.

'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:- The Sharpe Ratio over 5 years of BUG Permanent Portfolio Strategy is 0.82, which is greater, thus better compared to the benchmark AGG (0.1) in the same period.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.93, which is greater, thus better than the value of 0.54 from the benchmark.

'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 (0.13) in the period of the last 5 years, the downside risk / excess return profile of 1.08 of BUG Permanent Portfolio Strategy is higher, thus better.
- Looking at ratio of annual return and downside deviation in of 1.22 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (0.71).

'Ulcer Index is a method for measuring investment risk that addresses the real concerns of investors, unlike the widely used standard deviation of return. UI is a measure of the depth and duration of drawdowns in prices from earlier highs. Using Ulcer Index instead of standard deviation can lead to very different conclusions about investment risk and risk-adjusted return, especially when evaluating strategies that seek to avoid major declines in portfolio value (market timing, dynamic asset allocation, hedge funds, etc.). The Ulcer Index was originally developed in 1987. Since then, it has been widely recognized and adopted by the investment community. According to Nelson Freeburg, editor of Formula Research, Ulcer Index is “perhaps the most fully realized statistical portrait of risk there is.'

Which means for our asset as example:- The Ulcer Index over 5 years of BUG Permanent Portfolio Strategy is 2.55 , which is greater, thus worse compared to the benchmark AGG (1.8 ) in the same period.
- During the last 3 years, the Ulcer Ratio is 2.68 , which is larger, thus worse than the value of 1.48 from the benchmark.

'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.'

Using this definition on our asset we see for example:- 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.
- Compared with AGG (-9.6 days) in the period of the last 3 years, the maximum DrawDown of -18.6 days is lower, thus worse.

'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:- Looking at the maximum days below previous high of 247 days in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively smaller, thus better in comparison to the benchmark AGG (331 days)
- Looking at maximum days below previous high in of 100 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to AGG (289 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.'

Which means for our asset as example:- Compared with the benchmark AGG (111 days) in the period of the last 5 years, the average time in days below previous high water mark of 50 days of BUG Permanent Portfolio Strategy is smaller, thus better.
- Compared with AGG (75 days) in the period of the last 3 years, the average days below previous high of 28 days is lower, 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.