January and February were a bit rough, eh? If you made the mistake of checking your portfolio [1] during those dark days, you might well have seen its value plummet since last May.
The FTSE All-Share was down more than 15% since then, for example.
On the other hand, if you spent winter in financial hibernation and you’re only just waking up, then all is probably coming up daffodils – and the Slow & Steady portfolio too is within a few quid of making up all its lost ground.
The Slow & Steady portfolio is Monevator’s model passive investing [2] portfolio. It was set up at the start of 2011 with £3,000 and an extra £880 is invested every quarter into a diversified set of index funds, heavily tilted towards equities. You can read the origin story [3] and catch up on all the previous passive portfolio posts here [4].
Six months ago most of our asset classes were flashing red, with just our UK government bonds acting as our main shock absorbers [5].
Now though only emerging markets remain negative, and barely so.
Indeed emerging markets were the strongest performer of the last quarter – putting on an 8.8% growth spurt.
That’s delivered a nice bonus for the portfolio. We rebalanced into emerging markets last time around [6], with 45% of our quarterly contribution going into our worst performing asset class, funded by a sale of UK equities. And that then turned out to be the only fund that backslid over the last three months!
This isn’t us trying to be dice-rolling active investors and it’s not witchcraft. Nor is it sheer luck. It’s simply the kind of boost you can expect from following common sense rules [7] without trying to be too clever.
It’s also interesting to note that our slug of global property has streaked ahead of our other equity holdings over the last year, demonstrating the wisdom of diversification [8].
Over the past year, our equity classes have performed as follows on a time-weighted basis:
- Emerging markets -11.00%
- Global property 2.87%
- Developed world ex-UK 1.22%
- UK All-share -4.91%
- Global small cap -1.13%
Hardly a year to remember but ample evidence of divergence.
Here’s the portfolio latest in ultra-def spreadsheet-o-vision:
[9]
The portfolio hit the comeback trail in mid Feb to end the quarter 4.45% up.
That leaves us £4,879 to the good and growing at 7.71% on an annualised basis – or more like 5% when you knock off a bit for inflation. Very respectable [10].
Notice the strong role conventional UK government bonds continue to play in our portfolio. Their annualised return of 6.41% is superior to the 5.80% we’ve earned on UK equities so far.
It’s continuing testament to the first rule of asset allocation: the most important decision you make is your split between equities and bonds [11].
New transactions
Every quarter we dropkick another £880 between the market’s goalposts. Our cash is divided between our seven funds according to our asset allocation.
We use Larry Swedroe’s 5/25 rule [7] to trigger rebalancing moves, but all’s quiet this quarter. We’re just topping up with new money as follows:
UK equity
Vanguard FTSE UK All-Share Index Trust – OCF [12] 0.08%
Fund identifier: GB00B3X7QG63
New purchase: £70.40
Buy 0.459 units @ £153.35
Target allocation: 8%
Developed world ex-UK equities
Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.15%
Fund identifier: GB00B59G4Q73
New purchase: £334.40
Buy 1.431 units @ £233.61
Target allocation: 38%
Global small cap equities
Vanguard Global Small-Cap Index Fund – OCF 0.38%
Fund identifier: IE00B3X1NT05
New purchase: £61.60
Buy 0.318 units @ £193.81
Target allocation: 7%
Emerging market equities
BlackRock Emerging Markets Equity Tracker Fund D – OCF 0.25%
Fund identifier: GB00B84DY642
New purchase: £88
Buy 81.784 units @ £1.08
Target allocation: 10%
Global property
BlackRock Global Property Securities Equity Tracker Fund D – OCF 0.23%
Fund identifier: GB00B5BFJG71
New purchase: £61.60
Buy 36.558 units @ £1.69
Target allocation: 7%
UK gilts
Vanguard UK Government Bond Index – OCF 0.15%
Fund identifier: IE00B1S75374
New purchase: £132
Buy 0.869 units @ £151.87
Target allocation: 15%
UK index-linked gilts
Vanguard UK Inflation-Linked Gilt Index Fund – OCF 0.15%
Fund identifier: GB00B45Q9038
New purchase: £132
Buy 0.847 units @ £155.82
Target allocation: 15%
New investment = £880
Trading cost = £0
Platform fee = 0.25% per annum.
This model portfolio is notionally held with Charles Stanley Direct [13]. You can use that company’s monthly investment option to invest from £50 per fund. Just cancel the option after you’ve traded if you don’t want to make the same investment next month.
Take a look at our online broker table [14] for other good platform options. Look at flat fee brokers if your portfolio is worth substantially more than £20,000.
Average portfolio OCF = 0.17%
If all this seems too much like hard work then you can buy a diversified portfolio using an all-in-one fund such as Vanguard’s LifeStrategy series [15].
Take it steady,
The Accumulator