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The Slow and Steady passive portfolio update: Q1 2025

The Slow and Steady passive portfolio update: Q1 2025 post image

During the previous Trump term, the first thing I did every morning was look at the news on my phone – just to check he hadn’t blown anything up.

I made a deal with myself that I wouldn’t do that again through Trump Part II.

Well, that’s over, as is much of what we’ve taken for granted about the US-led international order that’s underpinned Western prosperity since World War 2.

Partisan bias causes people to be more negative about the economy whenever their ‘side’ is out of power. But at least in the past I always believed that any US President had a vested interest in the common good. There was always a hope their policy medicine could work, even if I believed it to be harsh, or likely to cause bad side-effects.

Sadly, Trump’s medicine is all side-effects and no therapeutic value. It’s the hydroxychloroquine of economics.

And this time, there’s nobody in Trump’s administration to tell him it’s a lose-lose idea. Or to at least distract him with some less important toy to break.

Trump tariffs tantrum

The market’s verdict is clear. Here’s the stock market slide as represented by various ETFs, with Trump’s Ruination Day tariffs listed per country (black text on each bar):

Equity ETF returns per country from 2 April to 4 April 2025. Source: JustETF. Not shown: 41% tariffs on the Falkland Islands, 0% on Russia, 50% on mighty Lesotho, 10% on Penguin Island.1 10% on British Indian Ocean Territory – inhabited by US and UK military personnel only.

Two things stand out, aside from it being a global bin fire.

Firstly, the US market is one of the worst affected.

Secondly, at the time of writing there’s little correlation between the size of Trump’s tariff and the impact on individual country stocks.2

For instance, the Australian market is down over 10% after a 10% tariff slap. Yet Vietnamese firms ‘only’ dropped 5.8%, despite Vietnam’s 46% tariff clothesline.

Meanwhile the UK’s FTSE All-Share lost 6.3% – even though we supposedly got off lightly.

Tis but a flesh wound

Nobody knows if Trump will walk some of this back or escalate. His advisors don’t know. He probably doesn’t know himself.

More to the point, nobody can predict how business and consumer confidence will bear up against the turmoil and anxiety. But it’s hardly the time to splash out is it?

Perhaps deleting all our news and stock market apps is the way to go – because here’s one way to view the decline:

A 4.6% loss since the start of January this year only sets the Slow & Steady portfolio back to July 2024. That doesn’t even rank among the top five worst quarterly losses in our model portfolio’s short life.

The portfolio’s worst drawdown was -14.9% in 2022. And we haven’t actually experienced a proper bear market loss since gunning up the portfolio more than 14 years ago.

That’s a blessing! But it also means that many of us haven’t been truly tested yet.

Risk matters

William Bernstein advises investors to use their first bear market as a reality check – a verification of your actual risk tolerance.

If you panicked last time, then Bernstein thinks you should ease back on equities and beef up your bonds so you’ll find it easier to handle the next go around.

But what happens if you haven’t previously experienced a bear market for equities – but you did recently suffer a hideous bond shock?

My guess is that some of us are in over our heads on the equities side, having grown leery of bonds. Perhaps we’re relying on diamond hands that could to turn to jelly in a real rout.

That happened last time during the Covid crash. Some of the Monevator community fled the field.

Granted, the market in March 2020 was going down like a lift with its cable cut. Yet equities bounced back within five weeks.

That was then…

If you’re feeling a grim sense of foreboding then I’m right there with you. But if you’re feeling scared or downright sick at the thought of what could happen next then you’ve got a couple of viable choices.

You could pare back a little on risk. Swap, say, 10-20% of your equities for bonds and/or cash.

Things could easily get even worse from here – though nobody knows for sure – so perhaps take a hit now to stave off being completely broken later.

Alternatively, brace yourself and hold on for dear life.

There should be a stock market pain simulator out there but this chart is the best I can do:

This chart shows the frequency of bull and bear markets in US stocks (1900-2020)

Bull and bear markets over time (US). Source: Vanguard

Take a long look at those negative numbers, and at how many years you might have to wait to turn the corner. Can you live with that?

If you can, then you should eventually be rewarded with one of the successive growth eruptions that dominate the chart.

Maybe sooner. Maybe later. Who knows where this goes next? The adults are not in the Situation Room.

But some day they will be again.

So if you’re not ready to bail, if you’re in it to win it, then you’re gonna have to take some pain. Grit your teeth, pull down your tin hat, and pledge that you won’t sell.

Here’s a fortifying tweet – quoting Barry Ritholtz’ new book – that might help:

There’s never any 100% guarantees. But history is on the side of investors who’ve held fast for the long-term.

How’s the Slow & Steady doing?

Everything is down in our model portfolio for the quarter, except for bonds. At least something is still working!

Here are the latest numbers (as of 4 April – a long time ago):

The Slow & Steady is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £1,310 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and find all the previous passive portfolio posts in the Monevator vaults. Last quarter’s instalment can be found here.

New transactions

Every quarter we throw £1,310 of red meat at the wild dogs of the market. Our stake is split between our portfolio’s seven funds, according to our predetermined asset allocation.

We rebalance using Larry Swedroe’s 5/25 rule. That hasn’t been activated this quarter, so the trades play out as follows:

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.2%

Fund identifier: GB00B84DY642

New purchase: £104.80

Buy 53.571 units @ £1.96

Target allocation: 8%

Global property

iShares Environment & Low Carbon Tilt Real Estate Index Fund – OCF 0.17%

Fund identifier: GB00B5BFJG71

New purchase: £65.50

Buy 29.39 units @ £2.23

Target allocation: 5%

Developed world ex-UK equities

Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%

Fund identifier: GB00B59G4Q73

New purchase: £484.70

Buy 0.752 units @ £644.76

Target allocation: 37%

UK equity

Vanguard FTSE UK All-Share Index Trust – OCF 0.06%

Fund identifier: GB00B3X7QG63

New purchase: £65.50

Buy 0.242 units @ £271.17

Target allocation: 5%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.29%

Fund identifier: IE00B3X1NT05

New purchase: £65.50

Buy 0.170 units @ £384.75

Target allocation: 5%

UK gilts

Vanguard UK Government Bond Index – OCF 0.12%

Fund identifier: IE00B1S75374

New purchase: £301.30

Buy 2.253 units @ £133.75

Target allocation: 23%

Global inflation-linked bonds

Royal London Short Duration Global Index-Linked Fund – OCF 0.27%

Fund identifier: GB00BD050F05

New purchase: £222.70

Buy 204.688 units @ £1.09

Target allocation: 17%

New investment contribution = £1,310

Trading cost = £0

Average portfolio OCF = 0.17%

User manual

Take a look at our broker comparison table for your best investment account options.

InvestEngine is currently cheapest if you’re happy to invest only in ETFs. Or learn more about choosing the cheapest stocks and shares ISA for your situation.

If this seems too complicated, check out our best multi-asset fund picks. These include all-in-one diversified portfolios such as the Vanguard LifeStrategy funds.

Interested in monitoring your own portfolio or using the Slow & Steady spreadsheet for yourself? Our piece on portfolio tracking shows you how.

You might also enjoy a refresher on why we think most people are best choosing passive vs active investing.

Take it steady,

The Accumulator

  1. Heard and McDonald Islands []
  2. Obviously the numbers in this piece will be out of date by the time you read it. []
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Weekend reading: Tanked by Trump

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“You cannot buck the market.”
– Margaret Thatcher

I didn’t want to go near politics again this week. By Tuesday I’d pre-written some thoughts about the FCA’s plan to increase the FSCS deposit limit to protect up to £110,000 of saver’s cash.

A sensible bit of technocratic rule-tweaking to marginally improve consumer protections. How lovely!

But then Donald Trump threw a wrecking ball into the markets – and, worse, the global economic system – by unveiling a tariff policy so moronic that even his critics were left momentarily meme-less.

The tariffs themselves are the least of my concerns, dreadful though they are on the face of it.

Trump has been clear about his love of tariffs for decades. He told everyone he was going to go hard on them. They were in his election pitch. His opponent Kamala Harris told voters he was serious.

Of course I’m concerned he’s declared a national emergency to grab the power to enact his tariffs. They are supposed to be set by Congress.

But nobody – least of all voters or the tech oligarchs who backed him and whose companies lost hundreds of billions of dollars in value this week – can say they weren’t warned.

At this dreadful juncture for American democracy, perhaps it’s even a small positive that Trump has followed through on his campaign promise.

Decline and fall

No, what really bothers me – terrifies me – is the ongoing ramifications of stuff like this:

Source: BBC

On the face of it, that’s a list of eye-watering tariffs that Trump plans to deploy against any countries that don’t come grovelling back to him begging for access to American markets.

That’s bad enough, given that if nothing changes it’ll plunge the world into a recession if not a depression.

But what should be troubling to everyone – but which while widely-covered by the wonks is being lost in the mainstream noise around trade wars and crashing markets – is that Trump is brazenly lying.

Lies, statistics, and bullshit

Trump stated to the American people that those countries imposed the tariffs he listed.

America was being kind, he suggested, by only reciprocating in half measure.

But I watched the Rose Garden speech live and like many I knew his figures were absolute garbage.

Soon enough author James Surowiecki and others had figured out that the numbers represented trade balance ratios. A short while later the administration put out a confirmatory statement.

Now, obviously such imbalances are a ridiculous way to measure the fairness of trade between the world’s richest country and, say, Cambodia.

Even more disturbingly, there are signs the paper might have been devised by leaning on ChatGPT.

But what should really frighten us all is that this is the erstwhile leader of the West lying to his own people in the baldest possible terms.

These numbers are not tariffs. He is lying.

Yes I know it’s Trump. I know everything he says is bullshit until fact-checked.

But when I was growing up this kind of theatre was the preserve of totalitarian communists, banana republics, and frontline reports from toppling dictators.

Not the US, of which I and most of the rest of the world expected far better.

Top of the populists

When this blog became radicalised in 2016 into covering politics, it wasn’t because I was a sore loser or even because I rued the self-harming decision of 52% of the electorate.

It was because that vote – and shortly afterwards Trump’s first win – were based on fabrications that the mainstream parties proved unable to counter.

Even worse, despite the manifestly terrible outcomes from that first flowering of an industrial-fabrication complex – a permanent hit to the economy here, an attack on the Capitol there – the anglophone populist leaders continue to make ground. And their supporters aren’t for turning.

Reform is topping the UK polls. We are on-track for mob rule – in both sense of the word – and too many people are still dismissing it all as larks.

Yes I’m aware politicians always stretch the truth, and lie now and then. Unlike some of my critics I was interested in politics long before Wetherspoon’s started putting slogans on beer mats.

But this wholesale deceit – and the lack of any accountability when it’s exposed – is from another category.

I’ll leave the history of where this could take us for a later escalation. Feel free to do your own research.

Unmade in the USA

Many optimists believe that the $6 trillion wiped off Wall Street valuations in two days this week will prompt a change of tack from the Trump administration.

Others speak with faux-sophistication about how these tariffs are just an opening gambit for deals. As if that’s its height of second-level thinking to understand that Trump is a bullshitter.

Yes I’m sure we’ll see deals and backtracking. But that will only undo some of the economic damage.

Besides, even taken seriously as a tool to drive Trump’s vision of a US manufacturing renaissance, this is a witless way to go about it.

One could imagine a less reckless US president who had vaguely the same aims constructing a new scaffolding of trade barriers, particularly targeting the likes of China and its proxy manufacturing bases.

Such an administration would set out a clear policy direction, show its sums, offer concrete timeframes, and give business some measure of certainty to plan the re-shoring of an element of production.

It would do so understanding that you do not re-work your global supply chain based on this week’s latest negotiating wheeze, let alone relocate physical factories from Vietnam to Kentucky on policies that might change tomorrow.

That’s because besides the sheer profit-wrecking cost of doing so – and the ongoing uncompetitiveness of your new factory once you’ve stood it up – the whole damaging exercise risks being done for nothing, and thus rewarding competitors who did nothing.

So without any certainty, Trump’s policy-making is likely to change very little.

Which is ironic because identifying certain unfair trading relationships, particularly with China, is one of the scant sensible planks of the Trump agenda.

True, far from being “looted, pillaged, raped, plundered” as Trump put it, the current arrangements have made America the world’s richest nation. No surprise when America set it up that way.

But the world has changed a lot, and the terms of trade with Asia in particular are up for renegotiation.

Alas many years of multiple rounds of intricate trade talks aren’t of any interest to a regime set upon creating maximum instability, along with a diet of bread and circuses for its credulous supporters.

Markets in MELTDOWN (Copyright CNBC)

Okay, that’s enough about these tariffs. Everyone who knows anything knows they’re disastrous, and has said so this week. I’ve included more links below.

If the tariffs do somehow persist then the rest of the world will just have to come together to trade more closely among themselves, sans the US, and so enjoy the benefits of free trade while America regresses.

But what about the markets?

Well on the one hand, here’s where UK investors are year-to-date:

A global tracker (dark blue) is down about 13% since 1 January, mostly due to falls in the US, with the Nasdaq now down 15% year-to-date (light blue).

The UK market (orange) is pretty flat though. And the iShares core UK gilt ETF (yellow, long-ish duration) is up nearly 3%. (Both excluding any dividends).

So that gives a bit of a broader perspective after the shellacking portfolios took this week. Indeed if you’ve been following your portfolio closely, then you’ll have seen the US markets fell as fast on Thursday and Friday as five years ago when Covid swept the world.

But we might look back a year (same assets as above) as follows:

On this view everything is pretty flat. You could say all we’ve done is blown the exceptional exuberance off the US market.

Remember many of us were already queasy about US valuations a year ago. So while earnings for the best US companies have advanced mightily over the past 12 months, from this perspective we can’t complain too much that a bit of a reckoning has taken place.

Fall in line

I don’t say any of this to make light of the pain of losing money.

Most people with risk-on globally-tilted portfolios will have seen at least 5% of their invested wealth wiped out in the past seven days or so.

Maybe a lot more. I know people who invest only in small-caps and growth stocks who are down double-digits.

The Magnificent Seven were already in a bear market – so more than 20% lower – even before Trump walloped them further on Wednesday.

But we know markets do this kind of thing, fairly regularly. They take the stairs up and drop down mine shafts.

Volatility and drawdowns are the price of admission for the higher returns we’re all so tempted to dial up when doing our long-term calculations.

Rationally irrational

Will the decline continue? I think it’s quite possible (although like everyone I know nothing).

You might remember a couple of weeks ago I explained why I wasn’t penning the ‘do not sell’ type post that some readers had requested, warning we could expect:

“a lot worse given the potential lasting damage to growth and cooperation that we’d see from a Trump administration that truly did what it’s saying it’s going to do.”

Well on the face of it that’s what we got this week.

The mob is into the machinery of the global economic engine that brought us wealth and prosperity for the past 80-odd years, and they’re wrecking it.

Set against that though, I think for the first time there was an element of panic in Friday’s sell-off.

The S&P 500 being down nearly 6% in a day isn’t actually irrational if we are going back to the 1930s – it’ll be an under-reaction – but markets don’t reset on a dime. There will be counter-reactions, usually after short-term plunges.

And on Friday a disorderly element was creeping in.

For instance, gold actually fell after climbing for months. That makes little sense unless it’s because over-leveraged hedge funds and the like were having to sell to meet margin calls.

What to do next

As always the time to prepare for a crisis in the markets is before it happens.

Hopefully you kept some bonds and other safety-first assets.

And hopefully you didn’t go all-in on the Magnificent Seven. Maybe Moguls bought some of the boring British stuff I’ve been writing about rather than loading up on Palantir and other wunderstocks.

The riskiest portfolios should still do better in the long-term. But portfolios and investor psyches have to survive the short-term to get there.

For most of us that requires balance, whether it be a passive investor properly diversifying across assets, or a stock-picker diversifying across sectors and geographies (or both!)

Naturally if this sell-off continues we’ll be revisiting these classic themes in the months to come.

But for now put on your special T-Shirt or make a comforting brew and then go out for a walk in the sunshine.

Markets are bad and the politics is worse.

But our portfolios will still be there on Monday.

More tariff talk:

  • What tariffs does the UK impose on US goods? – This Is Money
  • Trump’s aggressive push to rollback globalisation [Search result]FT
  • What Trump’s tariffs could mean for UK consumers – Guardian
  • Learning from Smoot-Hawley – Scott Sumner
  • Trade deficits do not make a country poorer – Noahpinion
  • American foreign economic policy is being run by the dumbest motherfuckers alive – Drezner’s World

Have a great weekend.

[continue reading…]

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Ten good reasons to hold cash

Ten good reasons to hold cash post image

Who would want to hold cash? Most seasoned Monevator readers know their way around far more exciting asset classes, after all.

For more than a few readers, I suspect your portfolio is your playground. You trade shares and reinvest your dividends with cheerful self-confidence.

You’re the playful otters of personal finance! Yet cash doesn’t seem to be a favourite toy.

And I get it. Cash is not exactly the most lucrative investment.

At best it’s going to barely keep up with inflation over the long-term.

At worst? Maybe it will continue to lose to inflation – it’s already flunked that low bar in recent decades.

Which I admit is pretty rubbish, considering there’s none of the potential with cash for the big gains that you can get with equities. Nor even the quite nice returns that your bonds might deliver in any given year.

No, compared to other assets cash lags far behind, like the teenage Squirrel on a cross-country run.

Show me the money

I like cash though. Cash is my comfort blanket. So I believe there’s a case for cash.

There may even be… a case for a case of cash!

Here are ten reasons I believe cash can be king for even you investing otters out there.

Reason #1: cash is liquid

Cash is most useful for unplanned expenses. 

If your roof blows off, your boiler explodes, you see the sports car you’ve always wanted at a bargain price, or your cousin needs bail money in Torremolinos (what, just us?) then you don’t want to rely on selling your shares, bonds, or other resources to raise money.

Being forced to sell assets at a time that doesn’t suit you is a great way to derail your investment strategy. Instead a cash pile can take the hit so your other holdings don’t.

Cash is also useful as a lifeline in the event of major personal drama.

Emergency funds don’t just cover having to rebuild your garden wall when it gets demolished by a passing coach heading for Flamingoland. (Again, just me?) There are bigger life-blips that have the potential to demolish all your plans.

The usual recommendation is to have six months of expenses in easy access cash accounts, in case something goes wrong in your life.

Unemployment is typically cited as the main money-related major risk. But I reckon illness and disability are underestimated hazards.

A six-month cash cushion gives you time, in theory, to get back on your feet if you lose your job.

Personally I’m happier with a year’s worth of cash – just in case multiple things go wrong at once.

It never rains but it pours.

#2: cash is liquid but also dry

I love the term ‘dry powder’, which is sometimes used by corporations and private equity funds to describe their cash reserves. (Imagine them all sitting in their boardrooms dressed as American Civil War cosplayers, polishing their muskets and trying to get their flags to swish nicely.)

Anyway, ‘dry powder’ – aka holding cash – enables you to respond to opportunities. So you can access your cash and buy quickly if you suddenly encounter that once-in-a-lifetime stock opportunity or must-buy market dip.

#3: cash is stable

Stable, boring, doesn’t do much… I had an ex like that.

But I absolutely love cash for its steadfastness. Unlike equities, with cash I know what returns I’ll be getting and I can plan accordingly. There’s still a little voice in my head that warns me the stock market is gambling (thank you, parents, for programming my subconscious), and cash keeps this little voice at bay.

You do, of course, have to keep an eye on the tax implications of going over the annual personal savings allowance. This currently sits at a measly £1,000 of interest if you’re a basic-rate taxpayer, and £500 if you’re in the higher-rate bracket.

Also, stability cuts both ways. The costs – those low expected returns – are stable, as well as the benefits.

#4: cash is useful for spending

This one is obvious, yes – but no less important for that.

Technically you can use other things to spend, like bitcoin, or even gold if you have one of those fancy gold spending cards.

But people overwhelmingly buy their day-to-day stuff with cash. So if you’re needing to buy food, clothes, petrol, toys, or anything else at all, you should have enough in your cash accounts to cover it.

There are credit cards, of course, but they deal in cash, too – future cash.

If you’re a family person, you’ll be very aware of how much the Bank of Mum and Dad relies on cash.

Increasingly though I’m also finding that the lesser-known Bank for Mum and Dad runs on cash, because my older relatives don’t have anything except for the equity in their houses.

#5: cash is simple

This is one of my favourite reasons to hold cash – the simplicity.

We all have, and use, bank accounts. We all have access to free savings accounts. None of us needs any specialist knowledge to operate our cash accounts.

I know plenty of people who would never touch equities and who are wary of all other asset classes, but they are brilliant at juggling bank accounts

Cash can be useful to anybody, anytime. It’s not exactly idiot-proof, but it is mostly anxiety-proof.

#6: cash can be useful and interesting!

I accept that if you’re involved in elaborate active antics in the stock market, you’re not going to find anything particularly exciting about your cash accounts.

But some of us live a much more boring life. We’re entertained by things like fixed-term accounts and flexible cash ISAs. 

And there’s actually a lot you can do when you hold cash, in terms of adroitly moving it around and deploying it to your best advantage. 

Returns from cash are never going to be amazing, but they’re potentially not to be sniffed at.

For example I’m a big fan of paying into multiple regular saver accounts. These can have interest rates of near-double the rates of standard savings accounts.

It all adds up…

#7: cash can be protected

In a world of volatility, when it sometimes seems that everything is falling down around our ears, cash is as about as close as we can get to guaranteed security.

(I work in education, where things are quite literally falling down…)

Even if you’re a mega-saver, it’s not hard to negotiate the £85,000 FSCS protection limit on cash savings by opening an account with another bank if you look like you’re approaching that amount. And that’s all you need to do to keep your money safe.

Well, that and avoid scams of course.

As somebody who worries about pretty much everything, I appreciate this reassurance.

#8: physical cash can be uniquely useful

Yes, I know that we’re moving towards a glorious cashless society. But you can still make a teenager’s face light up by putting a couple of £20 notes in their birthday card. 

Don’t try telling me that vouchers are just as good. We both know they’re not!

In fact you can do lots of fun things with physical cash.

And it’s even possible to get some fun out of not having it. An elderly relative of mine died recently, but before she went she whispered to her children that she’d hidden money all over the house.

The kids tore the place apart. Didn’t find a penny!

I like to think of her looking down on them and having a good laugh at their expense.

#9: cash is grabbable

The portability of cash rarely comes up in finance circles. But people have lives, and lives can be messy.

If you’ve ever been trapped in a bad relationship you’ll know how important it is to have a ‘go bag’ packed and ready, with copies of all your legal documents and plenty of cash.

Prepaid debit cards will do the job if you don’t want to keep a stash of banknotes in your bag. But whatever form your cash comes in, have it ready to go.

Relationships aren’t the only reason you might need some portable cash. If you live in a rough neighbourhood then again you might one day have to move fast.

Last year a nice police officer knocked on my door and told me to leave the house immediately, while the bomb squad rumbled down my street in an armoured truck.

I don’t think well on my feet. I grabbed my child, five packets of tissues, some ginger biscuits, and a dog-eared copy of Ovid’s Metamorphoses. 

At least I remembered the kid.

Ever since then I’ve had a bag ready to go – just in case. My bag holds everything I might need for an emergency night away.

Disaster ‘preppers’ have what they call ‘bug-out bags’ – although they’re more likely to prefer barter goods and/or gold coins over cash.

But they’ll still tell you to keep a few weeks’ worth of cash on hand, just in case the banks suffer a massive cyber-attack or the zombies get between you and the cashpoint.

Keep coins and small notes (no £50s) in case everyone has to suddenly switch to cash and the shops run out of ready money.

Zombies, I believe, do not carry change.

#10: hold cash as a useful part of your portfolio

All of the above relate to the practical uses of cash. But you can also hold cash to help balance a portfolio.

Holding cash is not the same as holding bonds, but in some respects it has a similar function.

Make sure you create a distinction between ‘portfolio cash’ and ‘emergency cash’ (and also ‘day-to-day cash’). Otherwise you’ll find yourself trying to use one pot to do at least two different things at once.

Cashing up

Maybe I just like to hold cash because I’m a pretty new investor and I haven’t quite found my feet. Or perhaps I like it because I’ve been through some tough times with no safety net, and having plenty of cash to hand now makes me feel more confident.

I guess it’s possible that in 20 years – sitting in my wing chair in the library of my castle – I’ll look back at this list and laugh at how cautious I was.

Who knows? Well, maybe you do.

If you’re further down the FIRE path than I am, has your perspective on cash changed since you started out? Do you still find space to hold cash? Or have you outgrown any dragon-like urge to hoard it?

Let us know in the comments below.

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Best multi-asset funds

Best multi-asset funds post image

Do you like simplicity? How about convenience? What about spending nearly none of your time on investing but getting on with your life instead?

Then multi-asset funds are made for you. 

In this post, we’ll help you choose the best multi-asset fund for your situation. You’ll learn how they work, and we’ll offer some thoughts on what features matter. 

What are multi-asset funds?

A multi-asset fund (also known as a fund-of-funds) offers you an instant portfolio with a single investing purchase. Instead of painstakingly choosing your own equities, bonds, and other assets, you accept the fund manager’s selection. 

The manager will diversify you across the major asset classes. They’ll also handle rebalancing and swallow the complexity of portfolio management

A fund-of-funds is so-called because it wraps several specialised funds into one neat investing package.

Each individual fund gives you exposure to a different sub-asset class. For example, one fund will invest in US stocks. Another in the UK. Yet another in the Emerging Markets. 

A multi-asset fund is essentially a meal deal. You may get a heartier helping of corporate bonds, say, than you’d otherwise have chosen, but that’s the trade-off.

You relinquish control on the grounds that the manager’s choice will provide a positive experience, minus the hassle of making all the decisions yourself.  

How do fund-of-funds work?

Fund-of-funds invite you to focus on the most fundamental decision in investing: how much risk do you want to take?

Each multi-asset fund in a given range corresponds to a different risk level. You pick the fund that best fits your risk appetite. You then simply choose how much to invest and leave management to get on with it.  

The risk levels are typically labelled something like:

  • Cautious
  • Moderate
  • Balanced
  • Growth
  • Adventurous

The higher your risk level, the more equities and fewer bonds your chosen fund-of-funds contains. 

An adventurous fund may be 100% equities. A cautious fund can be as high as 80% bonds. 

Risky business

Risk levels are predicated on the risk-reward trade-off. 

This investing theory holds that higher rewards accrue over time to investors who bear more risk. 

The empirical upshot is that equities have typically been the best asset for growing wealth over the long term. That’s because investors have demanded a premium for putting up with their volatility and periodic crashes. 

The downside of taking risk? Your investments can be underwater until the market recovers. 

That’s where bonds come in. High-quality government bonds can moderate stock market losses. But their crash protection doesn’t always work. And it usually curtails growth somewhat. 

A risk-averse investor – perhaps one who’s older and more interested in wealth preservation – should choose a multi-asset fund towards the more cautious end of the spectrum. 

On the other hand an investor who’s gung-ho for growth is liable to have a large risk appetite. Perhaps because they’re confident they’ll ride out temporary setbacks without panicking about paper losses. 

Going back to the meal deal analogy, picking the riskiest multi-asset funds is like telling the chef you’re up for his extra hot spicy curry. Despite knowing it’s almost certain to give you a squeaky-bum-time at some point. 

If you’ve no idea how to even begin to choose your level, see our piece on risk tolerance

The middle fund-of-funds in each range usually approximates the 60/40 portfolio.

Best multi-asset funds

Here’s my pick of the best multi-asset funds available:

Multi-asset funds range Passive or Active? OCF (%) Watch out for We like
Vanguard LifeStrategy Passive 0.22 Home bias High proportion of government bonds
Fidelity Multi Asset Allocator Passive 0.2 No home bias
Small cap equities
Property
HSBC Global Strategy Portfolio Active 0.19-0.22 No home bias
Property
Abrdn MyFolio Index Active 0.2 Home bias
Junk bonds
Low government bonds
Property
VT AJ Bell Funds Active 0.31 Home bias
Junk bonds
Low government bonds
Legal & General Multi-Index Funds Active 0.31 Home bias
Junk bonds
Low government bonds
Property
Index-linked bonds
BlackRock Consensus Funds Active 0.22 Home bias
Very low US
Very low emerging markets
BlackRock MyMap Funds Active 0.17 Junk bonds No home bias
Commodities
Schroders Global Multi-Asset Portfolios Active 0.21 Home bias
Low government bonds
Commodities

Source: Monevator research

The table lists the multi-asset fund ranges I think merit further investigation.

  • The best fund-of-funds for you is a personal decision.
  • Your choice from any particular range should be guided by your risk tolerance. 

But how would I choose the best multi-asset fund for me? 

Fund-of-funds fundamentals

Above all, I believe most investors benefit from a passive investing strategy.

Hence the top spots go to the two multi-asset fund ranges that adhere reasonably well to a passive approach.

This means their asset allocations aren’t likely to change much while you’re not looking. Moreover their portfolios consist mostly of index trackers

The other multi-asset funds in the table also hold lots of index trackers. But the difference is they employ active management.

An active mandate gives the managers licence to change your asset allocation.

Some operate within wide risk bands, too – some fund-of-funds can contain anywhere from 40% to 85% equities. 

This flexibility sounds like a strength. But it’s often counterproductive in practice, because even the experts’ powers of prediction are weak.

The ‘sell’ is that a skilled manager has the potential to deliver great performance while protecting their investors from downside risk. That claim is mostly a vain hope, as we’ll see in a moment.

Overall, active management is likely to be a less effective strategy for most people. 

Of the passive multi-asset funds, the Vanguard LifeStrategy range is the clear leader. Its balance of sensible asset allocation, consistency, reasonable cost, and long-term returns make it a great choice. 

Every other contender on the list must really be viewed as an alternative to Vanguard LifeStrategy. 

That said, you may want to consider putting some money into a Vanguard LifeStrategy alternative once your portfolio has grown large enough that it makes sense to diversify your fund manager risk.

You don’t want all your eggs in one basket, in short. Our investor compensation scheme piece explains more. 

A couple of additional notes on the table:

  • OCFs listed are based on the best available fund share class that’s accessible via UK brokers on a non-exclusive basis.  

Multi-asset funds: what to watch out for

There are many ways to rank funds.

Counterintuitively, recent results aren’t foremost among them. Primarily because as all the fund literature baldly states: “Past returns are no guarantee of future performance.”

For that reason it’s better to pick an option that best suits your circumstances and is geared towards investing best practice. 

All things being equal:

Home bias1 has resulted in many of the fund-of-funds holding more UK equities than investing theory suggests is optimal. 

Multi-asset funds that overweight the UK are usually underweight US equities, too. This posture may work for or against you, depending on the whims of the market gods. But as a deliberate choice it makes most sense for retirees with bills to pay in the UK, or if you believe the US market is dangerously overvalued

Note that fund-of-funds typically carry only small payloads of index-linked bonds. The funds rely on equities as a long-run inflation hedge instead. 

Inflation is a big concern for retirees. If that’s you, then consider target-date funds with stronger anti-inflation defences. 

Beware trivial asset allocations. Holding 2-3% of something won’t make much difference to your return. However it may help the fund look more sophisticated!

Fund-of-funds and corporate bonds

A fund’s allocation to corporate bonds is worth investigating if you’re choosing an alternative to Vanguard LifeStrategy. 

Many multi-asset fund ranges include a large percentage of corporate bonds in their asset mix. 

And while bonds are generally assumed to reduce risk, whether they do so depends on the type of bond:

  • High-quality government bonds are reasonable hedges against a stock market crash. (High quality means a credit rating of AA- and above)
  • Corporate bonds – even when dubbed ‘investment grade’ – are less useful in a crisis
  • High-yield (or junk) corporate bonds typically heighten risk – much like equities

So pick a fund-of-funds with a strong government bond asset allocation and credit rating if you want to keep a tight rein on risk. 

That may mean dropping down a risk level or two if you’re set on a fund that devotes the lion’s share of its bond allocation to corporate debt. 

UK multi-asset funds results check

A Best multi-asset funds performance table showing 10-year returns from end-of-March 2015 to end-of-March 2025

Source: Trustnet Chart tool

The results comparison above compares the UK fund-of-funds that are closest to a 60/40 equity/bond split in each range.

We already know that past performance does not predict the future. But it’s still worth checking the five-year and ten-year timeframes. Do any trends pop out?

For example, over ten-years the passive Vanguard LifeStrategy 60 has comfortably beaten its active management rivals, apart from HSBC Global Strategy Balanced.

This result is a microcosm of the entire passive vs active investing debate.

If you pick any broad market, you will likely find active funds at the top and the bottom of the league tables.

Most passive funds, meanwhile, usually loiter somewhere in the top half.

The problem is that the table-topping active funds regularly change. To benefit from the winners, you have to be able to choose them ahead of time. There lies the rub, and sadly picking the winners is much harder than plumping for whoever has done well of late.

That said, Global Strategy edged Vanguard LifeStrategy by 0.2% when we first began tracking multi-asset funds six years ago.

Three years ago, Global Strategy eked out a 0.4% lead over LifeStrategy while now the gap is 0.6%.

So Global Strategy has consistently delivered over that timeframe (which is still short in the scheme of things) and seems like a well-run fund.

Short termism

Five-year returns are the minimal viable comparison period in my view – a blink of an eye in investing terms – and not long enough to draw firm conclusions from.

Over the stubbier time-frames, short-term management decisions can pay off for a while.

For example, the Abrdn MyFolio Index III fund currently holds 75% equities – at the very top end of its range for risky assets.

That move has juiced its returns for now. The fund boasts the best one-year return in the table. But very few managers enjoy 10-year winning streaks. They tend to fall back into the pack over time.

That’s why the 10-year return is a much better test of prowess. Mistakes tend to cancel out temporary runs of good form.

The benchmark

I’ve added the IA Mixed Investment 40-85% returns to the table, inside the green dotted lozenge. These numbers show the average return for all funds belonging to this category, and are a reasonable yardstick for comparison.

(The Investment Association, or IA, is the trade body that represents the UK’s investment management industry.)

Because this category is dominated by active funds, you can see that many investment professionals aren’t adding value over ten-years, given that the passive Vanguard LifeStrategy 60 comfortably surpasses the 4.9% average.

But it’s actually worse than that.

The DIY passive alternative to holding multi-asset funds like these is to run a two-fund 60/40 portfolio.

For example, you could have:

  • 60% in global equities
  • 40% in global bonds hedged to GBP

Rebalance every year and you’d enjoy a portfolio that captures the bulk of the risk-reward trade-off offered by the funds-of-funds in the table.

Over 10-years, that 60/40 portfolio2 delivered a 6.3% annualised return.

You would think that the vast majority of skilled active managers could best such a simple portfolio. Yet they have not.

ESG multi-asset funds

Most multi-asset managers also now offer fund-of-funds with an ESG spin.

It’s extremely difficult to verify ESG credentials. Hence we’ll just offer a few leads for further research:

  • BlackRock MyMap Select ESG
  • Legal & General Future World Multi-Index
  • Abrdn MyFolio Enhanced ESG

Vanguard’s candidate is its SustainableLife Fund range. But this fund’s holdings are too concentrated for my liking. 

Also, all of the ESG options above are actively managed. 

Multi-asset ETFs

A handful of multi-asset ETFs trade on the London Stock Exchange. JustETF maintains a good list.

iShares’ Portfolio ETF range is worth a look.

The rest are either too narrowly focused, expensive, or new to make the table for now. We’ll keep an eye on them though.

The Swiss army knife of investing

If managing your investments makes you want to stick pins in your eyes then rest easy – a multi-asset fund is a good way to get the job done. 

Choose a fund loaded with equities to take more risk in pursuit of higher rewards. Or opt for a fund-of-funds with more bonds for a smoother ride.

Ultimately, it’s your topline equities/bond split that will count most towards your long-term result. 

Go for the extra bells and whistles if you believe the evidence. But don’t be fooled into thinking that more always means better.

Take it steady,

The Accumulator

  1. The tendency of investors to have an overweight holding of shares listed in their own country. []
  2. 60% IMID ETF, 40% XGSG ETF []
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