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 investment’s overall performance.'

Which means for our asset as example:- Looking at the total return of 68.3% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark AGG (21.7%)
- During the last 3 years, the total return is 28.6%, which is higher, thus better than the value of 17% from the benchmark.

'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.'

Which means for our asset as example:- Looking at the annual return (CAGR) of 11% 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%)
- Compared with AGG (5.4%) in the period of the last 3 years, the annual performance (CAGR) of 8.8% is higher, 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.'

Which means for our asset as example:- Looking at the 30 days standard deviation of 7.2% in the last 5 years of BUG Permanent Portfolio Strategy, we see it is relatively greater, thus worse in comparison to the benchmark AGG (4.6%)
- During the last 3 years, the 30 days standard deviation is 8.6%, which is greater, thus worse than the value of 5.4% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Using this definition on our asset we see for example:- Looking at the downside risk of 5.4% 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 greater, thus worse than the value of 4.1% from the benchmark.

'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 (0.33) in the period of the last 5 years, the ratio of return and volatility (Sharpe) of 1.18 of BUG Permanent Portfolio Strategy is greater, thus better.
- During the last 3 years, the Sharpe Ratio is 0.73, which is larger, thus better than the value of 0.53 from the benchmark.

'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:- The ratio of annual return and downside deviation over 5 years of BUG Permanent Portfolio Strategy is 1.58, which is larger, thus better compared to the benchmark AGG (0.44) in the same period.
- Looking at excess return divided by the downside deviation in of 0.95 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to AGG (0.69).

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Applying this definition to our asset in some examples:- The Ulcer Index over 5 years of BUG Permanent Portfolio Strategy is 2.51 , which is greater, thus worse compared to the benchmark AGG (1.63 ) in the same period.
- During the last 3 years, the Downside risk index is 3.12 , which is higher, thus worse than the value of 1.15 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:- Looking at the maximum drop from peak to valley of -18.6 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 (-9.6 days)
- Looking at maximum drop from peak to valley in of -18.6 days in the period of the last 3 years, we see it is relatively smaller, thus worse in comparison to AGG (-9.6 days).

'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'

Applying this definition to our asset in some examples:- The maximum time in days below previous high water mark 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.
- Compared with AGG (225 days) in the period of the last 3 years, the maximum days below previous high of 247 days is larger, thus worse.

'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:- Looking at the average days below previous high of 49 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 (97 days)
- Compared with AGG (58 days) in the period of the last 3 years, the average time in days below previous high water mark of 64 days is higher, thus worse.

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.