What caught my eye this week.

I can’t deny the Monevator Christmas party is always a little awkward, but I look forward to it every year.

It’s the anonymity that makes it tricky. Not just keeping our identities secret from the waiting staff, but also from each other.

Finumus doesn’t want anybody to know who he really is, you see. But when you land your private helicopter in the pub garden it’s a bit of a giveaway.

Meanwhile my false beard always gets covered in gravy.

Secret Santa adds to the surreal air, but again it’s easy to guess who gave what.

Did I really need The Accumulator’s slightly musky Chillbreaker now the cost-of-living crisis is over?

And while Squirrel accepted her framed stock certificate of a triple-levered uranium ETF – blatantly from Finumus – with good grace, TA groaned as he unwrapped a copy of One Up On Wall Street.

“Every bloody year…” he complained, warding off Peter Lynch’s stock-picking classic with a copy of Tim Hale’s Smart Money – which he carries with him everywhere to shun temptation, like a Holy cross.

Lynch’s book flew back through the air at me – it’s not easy to duck when you’re sporting a three-foot long beard – and I packed it away for next year.

(Stay hungry, stay frugal!)

Then there are the gatecrashers.

It’s nice enough when Lars shows his face for old time’s sake. And it’s heartening to see The Greybeard grown fat on his equity income trust dividends after all these years.

But is that not Ermine in the corner? Plotting something with a bright-looking fellow on a dusty old Sinclair computer?

When the whole of yesteryear’s Team Monevator turns up expecting brandy and mince pies, I’m afraid to say we sneak out the back door and escape via that waiting chopper.

Monevator membership revenues are going quite well, but we’re not running another Studio 54 here!

Thank you, thank you

Talking of membership, a huge thanks to the many readers who now support this site with a few quid every month. It’s made a big difference.

I was reading Ed Zitron this week on how the Internet, media, and just using a computer has been progressively ruined over the past decade, and I thought again that I’d probably have turned off Monevator if enough people hadn’t signed up to support our work.

Zitron writes:

As every single platform we use is desperate to juice growth from every user, everything we interact with is hyper-monetized through plugins, advertising, microtransactions and other things that constantly gnaw at the user experience.

We load websites expecting them to be broken, especially on mobile, because every single website has to have 15+ different ad trackers, video ads that cover large chunks of the screen, all while demanding our email or for us to let them send us notifications.

I know – of course we do some of this ourselves.

We show ads to non-members on the website, and I prompt new visitors to sign-up to read us by email. We (sparingly) use affiliate links. And some of this involves the same tracking stuff we’re all exposed to on every other site on the Internet, apart from possibly Wikipedia.

I suppose a few people may consider us adding a membership tier to be part of this ‘making everything worse’.

Well I don’t.

I love the membership tier and the purity of email.

Some dwindling number of diehards will never accept that creating digital products and destinations for years on end has to be paid for somehow.

But for the rest of us I prefer a model where we directly pay for things.

I do it myself with other websites and newsletters. Though I accept the costs add up, and there is a limit.

If you are of the grumpier persuasion, you’d probably be surprised at everything I turn down.

Paid-for links to crypto, currency exchange, and loan sites. (We never sell links). Well-known companies asking us to create stealthy articles to promote their products. Lucrative guest posts by SEO firms. The long trails of clickbait ads that even old-line newspaper sites have at the end of every article these days.

Again, you might say you’re looking at an advert next to these words on our website right now.

All I can say is that this is the thin end of a very thick wedge. And I fight to stay at the right end.

We’re still standing, yeah yeah yeah

Zitron’s article turned a bit hyperbolic but I agree with most of it.

However where I disagree is his broad brush claim that media sites have done all this ‘enshittification’ for vast growth and profits.

In fact they’ve usually made endless compromises and degraded the experience to near-unusable levels either because they are desperate not to go bust or because they already went bust and the new owner is squeezing out whatever juice is left in the brand. The big platforms have sucked all the air and money out of the Internet, and everyone else is left to starve.

We’re spoiled in the UK. We have the BBC and (whatever you think of the politics) The Guardian, two of the least-polluted free media sites left standing.

But countless others have gone dark, or else it would have been better had they done so.

As for independent blogs, maybe 95% of those I’ve linked to in the UK are no longer around.

Honestly, I’m sometimes tempted to turn Monevator into a subscription-only newsletter and switch off the lights, too. It’s a better experience for readers and better for us. No more fighting spam each day!

But we still get so many emails from new people thanking us for helping them take their first steps in investing, or from older hands for keeping them on the straight and narrow.

I’ve collected several hundred of these. That folder is probably the crowning achievement of my working life.

Perhaps I should have tried harder to achieve more, I guess, but anyway I’m loathe to turn off the site while we’re making a difference – however much Google is trying to kill us and others off with its endless algorithm changes.

So again, if you’re signed up as a Monevator member then thank you!

You make it possible for us to continue to keep 99% of the 2,000-plus articles we’ve written free to read. A portion of your subscription covers the 30 minutes or more I spend every day keeping Monevator clear of toxic links, racist and sexist comments, and bit rot.

Hopefully you’re enjoying the extra member content too, of course!

We’re able to go deeper in the member-only articles, especially with my active ones. And it’s very nice not to worry about search engines with them.

Don’t forget you can browse all our Mavens and Moguls posts in their archives. There’s quite a few now!

The weakest link

On the opposite tack, a few members have asked me to paywall more content.

Really – I was surprised too, but I guess it reflects a desire not to be taken advantage of.

Personally I feel we have the right balance with our investing-related content, but there is a chance that I will eventually make the Weekend Reading links a members-only affair.

Doing these links is a service to our regular readers. Nobody stumbles across them via search.

And Weekend Reading is the reading list I’d love to see each week if I wasn’t creating it myself. It takes eight to ten hours to compile each one (much of which consists of reading and rejecting articles you never see links to) but it is a labour of love.

However its roots lie in that better Internet of 20 years ago.

Back then we used to do ‘blog carnivals’ where blogs would link to each other to spread their traffic and credibility around.

Yet besides one or two honourable exceptions – thank you Simple Living in Somerset and Abnormal Returns – almost nobody links freely now.

I’ve included hundreds of links to certain blogs and had at most a couple back to us over two decades. More often zero.

I get it’s harder because we’re a British site and we can be kind of nerdy. But we do have some articles that are universally worthy of linking to.

Even worse, Google probably penalises us nowadays for doing what used to be the right thing and highlighting the best of the web via these links.

It’s so rare to do this now that it’s potentially become an indicator of a spammy link farm.

Ho hum. A halfway house would be to keep the Weekend Reading list free but for email subscribers only. So again, subscribe to the free emails if you haven’t.

Finally, if you’re a member but you’re not getting the emails you expect to see, then please do drop me a line via a reply to this email (ideally) or via the contact form link top-right (risk of getting stuck in spam.)

The system is not perfect, but I can always sort out problems. Ditto if you have log-in issues. (Deleting your cookies usually does the trick).

The best readers on the Web

Okay, that’s a lot in the weeds for a busy Christmas weekend.

I try not to solicit membership too often but the reality is some people churn away (et tu Maven?) so we have to keep topping up.

TLDR: please everyone sign-up as members and then we can stay classy indefinitely.

Beyond that, thanks for reading us for another year.

With all the competition from cat and dog TikToks and belaboured YouTube videos where someone reads out their Vanguard statement for 20 minutes for 100,000 views, we do not take our audience for granted.

Nor, for that matter, the many wonderful readers who add so much value in our comments.

If Monevator still has a USP in today’s universally indexing-friendly age, it’s surely in the quality of the discussions that take place beneath so many of our articles.

Happy new year

Right, that’s us almost done for 2024. I’ll have my Moguls missive out for December but otherwise we’re taking a break until the first Saturday of the new year.

So cheers, Merry Christmas – and see you in 2025!

(Now grab the other end of this cracker TA…)

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It looks like Vanguard is no longer the undisputed consumer champion of old. Vanguard’s USP has been waning for a while but the recent announcement of a £4 per month minimum charge for DIY investment services has put the tin lid on it. (Note: this price rise does not apply to Junior ISAs.)

Previously, Vanguard’s DIY investors paid a 0.15% platform fee calculated on their account balance. That made Vanguard excellent value for beginners, young investors, and anyone who can’t afford to put much away. 

But from 31 January 2025, customers will pay £48 annually for portfolios worth less than £32,000.1. 

This is a huge change. 

How Vanguard’s price rise affects small portfolio owners

Anyone with a £1,000 portfolio will pay £48 in charges or 4.8% of their account balance.

Previously they would have paid £1.50.

The numbers may not seem large until you consider that global equities post an average annual return of around 8%2.

At that rate, most of the example investor’s return will be consumed by fees. Precisely the fate that Vanguard’s founder, John Bogle, worked to help people avoid.

As Vanguard itself says, quoting Bogle:

Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.

Very true. And while all brokers are grappling with their own rising costs, an informed investor surveying the options will find that several other platforms are now more competitive than Vanguard for small portfolios.

Costly consequences

Vanguard’s £48 minimum means the platform is now only worth considering once you’ve amassed at least £19,200 in an ISA / GIA or £13,700 in a SIPP. (See below for our alternative picks).

You can sense-check your own numbers using the method we’ve previously outlined: How to work out which platform is cheapest for you. 

Do that and if your portfolio is worth well over £32,000 then you may be left wondering what all the fuss is about. You won’t see any fee hike at that level.

On the other hand…

Vanguard alternatives for small portfolios

^{Disclosure: Links to platforms may be affiliate links, where we may earn a small commission. It doesn’t affect the price you pay nor how we judge the brokers. This article is not personal financial advice. Your capital is at risk when you invest.}

The best Vanguard alternative right now is InvestEngine. InvestEngine’s platform charges and dealing fees are precisely zero for all account types including SIPPs.

InvestEngine hasn’t previously enabled SIPP transfers. But it’s now making an exception for Vanguard customers. 

If you’re wondering how InvestEngine can afford to offer its services for free, here’s its own explanation. But please read our zero commission broker article, too.

InvestEngine is covered by the standard £85,000 FSCS investor compensation scheme. 

Unlike Vanguard, InvestEngine is an ETF-only platform. I don’t think that’s a barrier though as ETFs are now cheaper than funds for many asset classes. And InvestEngine offers plenty of options, including non-Vanguard providers. 

• Here’s our take on ETFs vs index funds.

Another zero-fee alternative is Prosper.

Prosper is every bit as cheap InvestEngine. Again, you can read its own explanation on how it makes money.

Prosper is an app-only investing service, offering a limited number of index funds and ETFs – though Vanguard products are prominent. The range may be small but it has the main asset classes covered, and typically includes a competitive index tracker in each category.

Prosper also includes a SIPP in its account line-up, alongside an ISA and GIA as usual.

The firm itself is relatively new. But it is protected by the FSCS scheme.

Cheapest Vanguard alternatives if you prefer better known brands

These options are worth considering because they couple free fund trading with a low percentage platform fee:

Close Brothers:

• Pros: 0.25% platform fee, zero dealing fee on funds. 
• Cons: Expensive SIPP. 

HSBC Global Investment Centre:

• Pros: 0.25% platform fee, zero dealing fee on funds. 
• Cons: Restricted number of non-HSBC index funds. No SIPP. 

Fidelity:

• Pros: Cheap SIPP so long as you invest monthly – 0.35% platform fee, zero dealing fee on funds. 
• Cons: £90 minimum annual charge if you don’t invest monthly. Applies to accounts worth less than £25,000.

Santander Investment Hub

• Pros: Cheap SIPP – 0.35% platform fee, zero dealing fee on funds. The same price as Fidelity but no penalty for failing to invest every month. 
• Cons: Bad Trustpilot reviews albeit from a limited pool.

Dodl by AJ Bell:

• Pros: Dodl by AJ Bell is cheaper than the rest except InvestEngine and Prosper – but only once your portfolio passes the £4,800 mark. 
• Cons: Highly restricted fund and ETF list. £12 minimum annual account charge. 

Any other contenders?

There are a few more zero commission trading apps available but they don’t occupy the same space as Vanguard. While such firms offer ETFs, they’re primarily focussed on trading and speculating on high-risk assets.

Still, you can check many of them out via our broker comparison table.

Transfer day

There aren’t any exit charges to pay if you’d like to transfer your account away from Vanguard. 

Transferring is simple enough though it may take a few weeks. 

If your new broker doesn’t offer a Vanguard product then your investment will be sold to cash and the money moved over instead.  

Here’s Vanguard’s page on transferring out. 

These pieces explain what to watch out for:

• How to transfer a stocks and shares ISA
• How to transfer your SIPP
• What are the risks of being out of the market?

What a pity

This isn’t John Bogle’s Vanguard anymore.

A fee cut on its index funds is vanishingly rare these days. Over the past several years, the company focused more on adding higher-fee active funds to its roster. Now it’s squeezing small investors. 

Under Bogle, Vanguard changed the face of the investment industry through its relentless pursuit of a simple proposition: If it’s good for our customers, it’s good for us.

In so doing, it forced its competitors to become more like Vanguard – to the benefit of millions of people.

Now though Vanguard is starting to look more like everyone else. 

Take it steady,

The Accumulator

1. Account balances above that threshold are charged at 0.15% as before, with annual fees maxing out at £375. [↩]
2. Approximate historical annualised return, unadjusted for inflation [↩]

What caught my eye this week.

Was there ever a rationale way for investors with a 60/40-style equity/bond portfolio to avoid the worst of the government bond rout of 2022?

It’s a question that still bothers me. As a writer and an investing blog owner, mind you, not on my own account.

I didn’t own any bonds going into 2022 as an active investor. I’d felt gilts looked a poor risk-reward proposition for years.

But fret not – this isn’t a brag…

I found plenty of other ways to lose money in 2022. Indeed it was my worst showing on a relative basis in my investing lifetime.

However I didn’t own any government bonds. Which meant at least I didn’t suffer the indignity of seeing the supposedly ‘safer’ bit of a portfolio do worse than if I’d gone all-in on stocks.

Yield to no one

As I wrote in December 2022 in my recap of that woeful year:

Vanguard’s popular LifeStrategy funds have put in a Bizarro World performance:

• The supposedly lowest-risk LifeStrategy option – the 20/80 fund, with just 20% in shares and 80% in bonds – has done the worst.

• The best LifeStrategy fund to own in 2022 was 100% in shares.

This is the opposite of what we’ve come to expect from balanced funds like LifeStrategy.

And let’s be honest – it sucks.

True, the pain of 2022 has made government bonds investable again. That’s a genuine upside.

However for anyone who owned a lot of government bonds before the rout, such a silver lining must feel a bit like when your house burns down and at least you get the chance to plan a new kitchen.

Crying wolf about bonds

Whenever I reproach myself for not writing more about the risks of government bonds on very low yields, my co-blogger The Accumulator reproaches me in turn – by reminding me we did!

Long-time Monevator readers may recall such classics as:

• Why UK inflation-linked funds may not protect you from inflation [2016]
• How much will you lose if bond prices fall? [2020]
• Negative yields on bonds: what do they mean? [2020]

Also, I did fret openly about a potential government bond crash – way back in 2015!

Indeed – and even more tellingly – I first worried government bonds were getting overvalued in 2008, when the financial crisis was still raging and safety was a first resort.

As things turned out, the ‘low’ yields that spooked me then – yields which at the time had not been lower since World War II – still hovered above 3%.

Bond yields had far lower to go in the years ahead.

A wayback machine

In fact, gilt prices continued to climb inexorably – and hence their yields fell to near-zero – until 2022, when suddenly everything reversed.

So precipitous was the subsequent plunge that the iShares core UK Gilts ETF (ticker: IGLT) is still underwater compared to when I first fretted about low yields in December 2008!

IGLT is a distribution fund. Its price doesn’t include the return from dividends. But even if you’d reinvested your income from IGLT, the 16-year gains are puny:

Source: iShares

Over the same period a world equity tracker multiplied your money nearly six-fold. That’s not so much an opportunity cost as an opportunity catastrophe – unless of course you’d been prescient enough to sell your bonds in 2020.

But that’s hindsight speaking.

Good going until it wasn’t

We didn’t know for sure that the world wasn’t headed for another Great Depression in 2008 – or something even worse, if the ATMs had failed and all the banks went bust.

And even as yields fell further over the following 14 years, it still seemed futile to bet against bonds.

Yields would just be lower again the next year, and you’d be left with egg on your face.

The best a strict passive investor could probably do was to reduce their government bonds to a tolerable minimum and hold more cash (and other assets) instead.

But remember that for years that would have been a poor trade. The return on cash was nearly nothing. Yet bonds remained a decent investment, delivering steady returns well into the Covid era.

Our model Slow & Steady Passive Portfolio, for instance, outperformed our expectations for a 60/40 portfolio for years, in large part thanks to those relentless gains in bonds.

Don’t fight the last war

So where does all this looking back leave us as we ponder the future?

Well, arguably it’s all moot.

It’s one thing to say that perhaps there was a case for even a passive investing purist ‘market timing’ away from government bonds when the ten-year yield danced towards zero – and the expected returns from inflation-linked government bonds went negative.

But that isn’t where we are now. And there’s no reason to think we’ll see the like again in the next 50 years.

Those near non-existent bond yields were probably a special case.

In contrast, fiddling when the yield on the ten-year falls to 3.5% and you’d bought at 4% might be the stuff of a lucrative day job on the prop desk of an investment bank.

But everyday investors will surely to do worse for such tinkering…

…or will they?

Trigger happy

I’ll conclude with some interesting research shared by Jim Paulsen a couple of weeks ago on the U.S. flavour of a 60/40 portfolio.

For his purposes, Paulsen1 defines the ‘cost’ of holding a 60/40 portfolio as being how much it would lag a 100% equity allocation over any particular period.

This cost – in terms of foregone returns – is the price you pay for the lower volatility and downside protection of holding government bonds, with their guaranteed return of capital and knowable returns.

Digging into the numbers, Paulsen found that the cost has previously soared when the yield on a ten-year US Treasury bond falls below 4%:

Source: Paulsen Perspectives

There are probably two reasons for this observation over this period.

Firstly is the one Paulsen focuses on. When bond yields are low, you’re not getting compensated as much for owning government bonds in terms of income. On an inflation-adjusted basis, you might not be making money at all.

But secondly, I suspect there’s an equity timing signal buried here.

When government bond yields are very low, it’s probable people are more fearful than usual. They’ve likely bought government bonds for safety, presumably in part with money that could instead be invested in shares.

In that case equity valuations may be depressed – implying potentially higher returns from the ’60’ part of the portfolio going forward.

A new 4% rule…

Whatever the reason, Paulsen suggests the 4% yield level could act as a trigger for US investors to look again at their asset allocation should the ten-year US treasury yield fall below 4%.

Rightly he doesn’t suggest wholesale abandonment of a diversified portfolio, writing:

The 60/40 balanced portfolio makes sense for many investors and there is no reason to abandon balanced management even if the 10-year Treasury yield does decline again below the 4% trigger.

However, 60/40 investors may want to consider occasionally altering the balance mix depending upon which side of the Trigger they find themselves.

If you generally are a 60/40 investor, perhaps you could adopt the simple rule of being 50/50 when above the yield Trigger and switching to 70/30 when below the yield Trigger.

Depending on each individuals’ risk tolerance, this ‘toggle approach’ may not be appropriate.

But for those balance investors who may want to try and take advantage of the 4% Trigger and keep the ‘relative cost’ of balanced management reasonable, adjusting the mix slightly around the toggle may prove profitable, perhaps as soon as in 2025.

Finally I’d note that Paulsen’s backwards data dive only ran to 1945 (when, as I said above, bond yields were last very low) and also that this is US data, with its rip-roaring equity gains to greatly plump up the ‘cost’ side of the equation.

Still, food for thought. Especially if yields ever do descend into the depths again.

Have a great weekend.

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1. For many years the chief investment strategist at giant US bank Wells Fargo. [↩]