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:
  • Compared with the benchmark SPY (75.6%) in the period of the last 5 years, the total return of 35.9% of Enhanced Permanent Portfolio Strategy is lower, thus worse.
  • Looking at total return, or increase in value in of 16.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (40%).

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.'

Using this definition on our asset we see for example:
  • Looking at the annual performance (CAGR) of 6.3% in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively lower, thus worse in comparison to the benchmark SPY (11.9%)
  • Looking at annual return (CAGR) in of 5.2% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to SPY (11.9%).

Volatility:

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Which means for our asset as example:
  • Compared with the benchmark SPY (20.3%) in the period of the last 5 years, the 30 days standard deviation of 9.2% of Enhanced Permanent Portfolio Strategy is lower, thus better.
  • Compared with SPY (23.6%) in the period of the last 3 years, the 30 days standard deviation of 10.7% is lower, thus better.

DownVol:

'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 SPY (14.9%) in the period of the last 5 years, the downside volatility of 6.9% of Enhanced Permanent Portfolio Strategy is smaller, thus better.
  • During the last 3 years, the downside volatility is 8%, which is smaller, thus better than the value of 17.3% from the benchmark.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Using this definition on our asset we see for example:
  • Compared with the benchmark SPY (0.46) in the period of the last 5 years, the risk / return profile (Sharpe) of 0.42 of Enhanced Permanent Portfolio Strategy is smaller, thus worse.
  • Compared with SPY (0.4) in the period of the last 3 years, the Sharpe Ratio of 0.25 is lower, thus worse.

Sortino:

'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 Enhanced Permanent Portfolio Strategy is 0.56, which is lower, thus worse compared to the benchmark SPY (0.63) in the same period.
  • During the last 3 years, the ratio of annual return and downside deviation is 0.33, which is smaller, thus worse than the value of 0.54 from the benchmark.

Ulcer:

'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.'

Applying this definition to our asset in some examples:
  • The Ulcer Index over 5 years of Enhanced Permanent Portfolio Strategy is 3.9 , which is smaller, thus better compared to the benchmark SPY (6.62 ) in the same period.
  • During the last 3 years, the Downside risk index is 4.07 , which is lower, thus better than the value of 7.55 from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the maximum drop from peak to valley of -17.4 days in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively larger, thus better in comparison to the benchmark SPY (-33.7 days)
  • Looking at maximum DrawDown in of -17.4 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to SPY (-33.7 days).

MaxDuration:

'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:
  • Looking at the maximum time in days below previous high water mark of 289 days in the last 5 years of Enhanced Permanent Portfolio Strategy, we see it is relatively higher, thus worse in comparison to the benchmark SPY (139 days)
  • Looking at maximum days below previous high in of 192 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to SPY (120 days).

AveDuration:

'The Average 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. 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 time in days below previous high water mark over 5 years of Enhanced Permanent Portfolio Strategy is 71 days, which is greater, thus worse compared to the benchmark SPY (37 days) in the same period.
  • Looking at average time in days below previous high water mark in of 53 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to SPY (31 days).

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, 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.