It’s time for the first trading update of the official Monevator, passive, model portfolio: The Slow and Steady [1] portfolio.
[2]
The portfolio invests purely in index funds [3]. The first purchases were made on December 31, 2010, with an initial lump sum of £3,000.
Another £750 of regular contributions are drip-fed in every quarter, and the latest purchases were made on April 1. An auspicious day if ever there was one.
In its first three months of life, the portfolio has inched up 0.59%, which amounts to a cash gain of £17.84. Who ever said passive investing isn’t a shortcut to fabulous wealth?
Actually, this move to profit is quite a turnaround, because I took a sneaky peek at the portfolio a few weeks ago, and it was haemorrhaging like an undercover cop in a Tarantino movie.
Events, dear boy, events
The markets were on something of a tear at year-end when we fed our initial lump sum into the financial wood-chipper. Since then we’ve been battered by bad news:
- UK economic contraction in the final quarter of 2010.
- Fears of overheating emerging markets [4].
- Devastating floods in Australia.
- Triple catastrophe in Japan – quake, tsunami, nuclear crisis.
- Middle East uprising – the wisdom of the crowds writ large, but bad for short-term economic stability.
The upshot is that the Japanese fund has been hammered, the emerging markets have dipped too and the Australian-dominated Pacific fund has been dragged down in their wake.
The countervailing bright spot is the European fund, perhaps benefitting from belief in Franco-German determination to defend the Euro.
Scores on the doors
Here’s how the individual funds have fared over the last three months:
[5]
What does all this tell us? Absolutely nothing of significance.
It’s fun to think about the trends and events that may have buffeted our funds over the last three months, but over a 20-year time horizon we’re relying on diversification, low cost funds [6] and the efficiency of the markets to ensure we come out ahead. There’s nothing for it but to stick to the plan.
New purchases
Our quarterly £750 injection buys:
UK equity
HSBC FTSE All Share Index – TER [7] 0.27%
Fund identifier: GB0000438233
New purchase: £146.47
Buy 41.812 units @ 350.3p
Target allocation: 20%
Developed World ex UK equities
Split between four funds covering North America, Europe, the developed Pacific and Japan.
Target allocation (across the following four funds): 50%
North American equities
HSBC American Index – TER 0.28%
Fund identifier: GB0000470418
New purchase: £191.81
Buy 99.899 units @ 192p
Target allocation: 27.5%
European equities excluding UK
HSBC European Index – TER 0.37%
Fund identifier: GB0000469071
New purchase: £77.79
Buy 15.316 units @ 507.9p
Target allocation: 12.5%
Japanese equities
HSBC Japan Index – TER 0.28%
Fund identifier: GB0000150374
New purchase: £52.04
Buy 85.008 units @ 61.22p
Target allocation: 5%
Pacific equities excluding Japan
HSBC Pacific Index – TER 0.37%
Fund identifier: GB0000150713
New purchase: £38.84
Buy 15.813 units @ 245.6p
Target allocation: 5%
Emerging market equities
Legal & General Global Emerging Markets Index Fund – TER 0.99%
Fund identifier: GB00B4MBFN60
New purchase: £82.25
Buy 155.746 units @ 52.81p
Target allocation: 10%
UK Gilts
L&G All Stocks Gilt Index Trust: TER 0.25%
Fund identifier: GB0002051406
New purchase: £160.77
Buy 102.793 units @ 156.4p
Target allocation: 20%
Total cost = £749.97
Cash = 3p (Woot!)
Trading cost = £0
Remember the portfolio is rebalanced [8] to its target allocations with the new money: a relatively straightforward task at this early stage. There are also no trading costs to worry about with the index funds used.
Take it steady,
The Accumulator