Description

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.

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

Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'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.'

Using this definition on our asset we see for example:
  • The total return, or increase in value over 5 years of Enhanced Permanent Portfolio Strategy is 62.9%, which is lower, thus worse compared to the benchmark SPY (102.6%) in the same period.
  • Compared with SPY (25.5%) in the period of the last 3 years, the total return, or increase in value of 32.9% is greater, thus better.

CAGR:

'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 Enhanced Permanent Portfolio Strategy is 10.3%, which is lower, thus worse compared to the benchmark SPY (15.2%) in the same period.
  • Compared with SPY (7.9%) in the period of the last 3 years, the compounded annual growth rate (CAGR) of 10% is larger, thus better.

Volatility:

'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 volatility of 8.9% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively smaller, thus better in comparison to the benchmark SPY (18.1%)
  • Compared with SPY (18.8%) in the period of the last 3 years, the 30 days standard deviation of 9.3% is lower, thus better.

DownVol:

'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 volatility of 6.2% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively lower, thus better in comparison to the benchmark SPY (12.6%)
  • During the last 3 years, the downside deviation is 6.3%, which is smaller, thus better than the value of 13.1% from the benchmark.

Sharpe:

'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.'

Applying this definition to our asset in some examples:
  • The Sharpe Ratio over 5 years of Enhanced Permanent Portfolio Strategy is 0.87, which is larger, thus better compared to the benchmark SPY (0.7) in the same period.
  • Looking at Sharpe Ratio in of 0.81 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (0.29).

Sortino:

'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:
  • The downside risk / excess return profile over 5 years of Enhanced Permanent Portfolio Strategy is 1.25, which is greater, thus better compared to the benchmark SPY (1.01) in the same period.
  • During the last 3 years, the excess return divided by the downside deviation is 1.19, which is larger, thus better than the value of 0.41 from the benchmark.

Ulcer:

'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 Enhanced Permanent Portfolio Strategy is 4.5 , which is smaller, thus better compared to the benchmark SPY (8.4 ) in the same period.
  • Looking at Ulcer Index in of 4.16 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to SPY (7.06 ).

MaxDD:

'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.'

Which means for our asset as example:
  • Compared with the benchmark SPY (-24.5 days) in the period of the last 5 years, the maximum reduction from previous high of -14.9 days of Enhanced Permanent Portfolio Strategy is higher, thus better.
  • During the last 3 years, the maximum DrawDown is -12.8 days, which is greater, thus better than the value of -19.2 days from the benchmark.

MaxDuration:

'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:
  • The maximum time in days below previous high water mark over 5 years of Enhanced Permanent Portfolio Strategy is 564 days, which is greater, thus worse compared to the benchmark SPY (488 days) in the same period.
  • During the last 3 years, the maximum time in days below previous high water mark is 401 days, which is greater, thus worse than the value of 290 days from the benchmark.

AveDuration:

'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:
  • The average days under water over 5 years of Enhanced Permanent Portfolio Strategy is 151 days, which is greater, thus worse compared to the benchmark SPY (118 days) in the same period.
  • During the last 3 years, the average days below previous high is 124 days, which is larger, thus worse than the value of 74 days from the benchmark.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Enhanced Permanent Portfolio Strategy are hypothetical and do not account for slippage, fees or taxes.
  • Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.