The classic permanent portfolio was created by Harry Browne. The idea was that a portfolio should be diversified enough to get you through a wide variety of economic and market environments and simple enough that even a child could do it. Originally it consisted of the following allocations:

- 25% in U.S. stocks
- 25% in long-term bonds
- 25% in gold
- 25% in cash

The Logical Invest permanent portfolio is somewhat more sophisticated, rebalances monthly and is not always split evenly across the three main assets. It can adapt to market conditions by putting more weight on gold or treasuries and less on equity depending on market conditions.

- US Market (SPY: S&P 500 SPDRs)
- Long Duration Treasuries (TLT: iShares 20+ Year Treasury Bond)
- Gold (GLD: Gold Shares SPDR)

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:- Looking at the total return, or increase in value of 46.5% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively smaller, thus worse in comparison to the benchmark SPY (64.5%)
- Looking at total return in of 26.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (47.3%).

'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.'

Which means for our asset as example:- Looking at the annual performance (CAGR) of 7.9% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (10.5%)
- Compared with SPY (13.8%) in the period of the last 3 years, the annual return (CAGR) of 8.1% is lower, thus worse.

'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:- Looking at the historical 30 days volatility of 6.7% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (13.3%)
- Looking at volatility in of 6.4% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (12.6%).

'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.'

Using this definition on our asset we see for example:- Looking at the downside volatility of 7.5% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively smaller, thus better in comparison to the benchmark SPY (14.6%)
- Compared with SPY (14.3%) in the period of the last 3 years, the downside deviation of 7.4% is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (0.6) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.81 of Enhanced Permanent Portfolio Strategy is greater, thus better.
- During the last 3 years, the ratio of return and volatility (Sharpe) is 0.88, which is smaller, thus worse than the value of 0.9 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.'

Using this definition on our asset we see for example:- The downside risk / excess return profile over 5 years of Enhanced Permanent Portfolio Strategy is 0.73, which is higher, thus better compared to the benchmark SPY (0.55) in the same period.
- During the last 3 years, the excess return divided by the downside deviation is 0.76, which is lower, thus worse than the value of 0.79 from the benchmark.

'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.'

Using this definition on our asset we see for example:- Compared with the benchmark SPY (3.99 ) in the period of the last 5 years, the Ulcer Ratio of 3.26 of Enhanced Permanent Portfolio Strategy is lower, thus better.
- Looking at Ulcer Index in of 3.28 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (4.05 ).

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Applying this definition to our asset in some examples:- Compared with the benchmark SPY (-19.3 days) in the period of the last 5 years, the maximum reduction from previous high of -9.1 days of Enhanced Permanent Portfolio Strategy is greater, thus better.
- Compared with SPY (-19.3 days) in the period of the last 3 years, the maximum reduction from previous high of -9.1 days is larger, thus better.

'The Maximum 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. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Which means for our asset as example:- Compared with the benchmark SPY (187 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 289 days of Enhanced Permanent Portfolio Strategy is higher, thus worse.
- Compared with SPY (139 days) in the period of the last 3 years, the maximum time in days below previous high water mark of 289 days is higher, 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.'

Using this definition on our asset we see for example:- The average days under water over 5 years of Enhanced Permanent Portfolio Strategy is 75 days, which is larger, thus worse compared to the benchmark SPY (41 days) in the same period.
- Looking at average time in days below previous high water mark in of 77 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (36 days).

Historical returns have been extended using synthetic data.
[Show Details]

Allocations and holdings shown below are delayed by one month. To see current trading allocations of Enhanced Permanent Portfolio Strategy, register now.

()

- "Year" returns in the table above are not equal to the sum of monthly returns due to compounding.
- Performance results of Enhanced 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.