≡ Menu

The Slow and Steady passive portfolio update: Q1 2017

The Slow and Steady passive portfolio update: Q1 2017 post image

You know how we humans like to shoot the messenger when they bring bad news? Well, I feel like I should be treated to a ticker tape parade and my choice of wives. Because here’s the latest dispatch – our investment garden is looking very rosy right now. Last quarter was good, and things have only gotten better thanks to Trump, Brexit, Hawaiian pig farmers, or your own rationale du jour.

Every asset class is higher. The portfolio has put on over 4% in three months and a staggering 11.8% on an annualised basis. That’s well above historical averages. The FTSE All-Share has managed 9.8% over the same period.

Here’s the portfolio in 8K RetinaBurn™ spreadsheet-o-vision:

Slow & Steady portfolio tracker, Q1 2017

So that’s another one-up for globally diversified passive portfolios.

The Slow and Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £900 is invested every quarter into a diversified set of index funds, heavily tilted towards equities. You can read the origin story and catch up on all the previous passive portfolio posts.

Wait a second – is everything going a bit too well? Shouldn’t we do something? Y’ know, tweak a few knobs to keep the pace up, bob and weave to evade onrushing disasters?

The US – it’s overvalued right? Everyone says so. Maybe we should dial back on that and switch into something cheap. How about Russia? That Vladimir Putin knows a thing or two…

Whenever my brain starts playing these kind of tricks on me, a good antidote is to consult this jellybean chart from Vanguard:

Which asset wins guessing game

The chart hurts my eyes, but it also shows the annual asset class winners and losers over the last decade. Each asset class is colour-coded, so you can quickly feast on the patterns that emerge.

Except they don’t. What we’ve got is a violent patchwork quilt that even grandma would burn because the pattern is about as meaningful as Snakes & Ladders.

For instance, emerging markets topped last year’s table. Up from bottom place the year before, and in 2013, and in 2011. Yet that period in the dumpster came after taking the top spot three times out of four from 2007 to 2010. Though the same asset class took the wooden spoon in 2008. It all tells you more about the volatility of emerging markets than anything else. Be prepared for a wild ride.

North American equities haven’t been out of the top three for the last four years – hence the current frothy valuations – but they registered six years of mostly mid-table mediocrity before that. Reversion to the mean then?

Interestingly, global equities have managed a top half performance in every year bar two. Diversification is looking pretty sound again. Take that brain.

The clash of colours on this table is nothing more than the flashing reels of the world’s most complicated casino. Nobody can predict the winners with any long-term consistency. And the Irrelevant Investor blog has this brilliant chart on how today’s US bull market stacks up against its predecessors.

How far does the US bull market have to run?

If history is any guide then today’s US bull market could have a long way to run. Of course it might not, but you could give up a lot of upside by swinging away now. I don’t bet against America, although I accept that the future returns of a highly valued market are unlikely to be as lucrative as a cheap market in the long term.

If you simply must do something, take a look at over-balancing. In the meantime, I’m going to stay out of the fiddling game and let the chips fall where they may.

We’re nicely diversified. Something’s gotta be the loser but for now let’s just enjoy the fact that everything is coming up, er, trumps.

New transactions

Every quarter we grease the market’s palm with another £900. Our cash is divided between our seven funds according to our asset allocation.

We use Larry Swedroe’s 5/25 rule to trigger rebalancing moves, but all’s quiet this quarter. So we’re just topping up with new money as follows:

UK equity

Vanguard FTSE UK All-Share Index Trust – OCF 0.08%

Fund identifier: GB00B3X7QG63

New purchase: £54

Buy 0.287 units @ £187.65

Target allocation: 6%

Developed world ex-UK equities

Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.15%

Fund identifier: GB00B59G4Q73

New purchase: £342

Buy 1.109 units @ £308.29

Target allocation: 38%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.38%

Fund identifier: IE00B3X1NT05

New purchase: £63

Buy 0.24 units @ £261.96

Target allocation: 7%

Emerging market equities

BlackRock Emerging Markets Equity Tracker Fund D – OCF 0.25%

Fund identifier: GB00B84DY642

New purchase: £90

Buy 61.058 units @ £1.47

Target allocation: 10%

Global property

BlackRock Global Property Securities Equity Tracker Fund D – OCF 0.22%

Fund identifier: GB00B5BFJG71

New purchase: £63

Buy 32.077 units @ £1.96

Target allocation: 7%

UK gilts

Vanguard UK Government Bond Index – OCF 0.15%

Fund identifier: IE00B1S75374

New purchase: £234

Buy 1.44 units @ £162.48

Target allocation: 26%

UK index-linked gilts

Vanguard UK Inflation-Linked Gilt Index Fund – OCF 0.15%

Fund identifier: GB00B45Q9038

New purchase: £54

Buy 0.287 units @ £188.15

Target allocation: 6%

New investment = £900

Trading cost = £0

Platform fee = 0.25% per annum.

This model portfolio is notionally held with Charles Stanley Direct. 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 for other good platform options. Look at flat fee brokers if your ISA portfolio is worth substantially more than £25,000.

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.

Take it steady,
The Accumulator

{ 72 comments… add one }
  • 1 The Rhino April 4, 2017, 10:16 am

    bravo S&S – what a resource! TA you are the man!

    Note that the LS option is closing the gap in terms of costs, I think its down to 0.22% now.

    I would agree that the old jelly bean chart is one of the most important ones I’ve ever clapped eyes on in terms of informing your investment strategy

  • 2 Claire April 4, 2017, 10:53 am

    Hi there,

    I’ve been a quiet reader for few months now, and learned a lot thanks to you.
    I’m in my twenties, and it feels powerful to learn about investments now.
    I have a question, and sorry if it seems basic, how do you calculate the gains/growth when you invest more money regularly?

    Thank you for your help!

  • 3 The Investor April 4, 2017, 11:00 am

    @Claire — Glad you’re finding us helpful. And great to start in your 20s! Your question is excellent, and something many experienced private investors skirt around. Unfortunately, there are some complicated answers. However my belief is it’s best to “unitize” your portfolio, which enables you to compare your portfolio’s return with any fund (all professional funds show unitized returns) or any other investor with a unitized portfolio, regardless of money flowing in and out.

    See my article here: http://monevator.com/how-to-unitize-your-portfolio/

  • 4 The Cardinal April 4, 2017, 11:40 am

    I am loving this project and looking to use something very similar for my SIPP which I currently hold with HL.

    However I could not find all the funds you list here and the ones I could find often had different charges associated. Are the charges you list here linked to a specific platform?

    For instance, you use BlackRock Emerging Markets Equity Tracker Fund D with an OCF of 0.25%. I can only find on the HL platform this tracker:


    This has a charge of 0.96%.

    So I looked at the Class A fund instead which was a net charge of 0.29% (seems to be through a rebate or loyalty bonus of 0.3% on a charge of 0.59%)

    Have I made a mistake in the way I’ve looked at this?

  • 5 Fremantle April 4, 2017, 12:08 pm

    I’m not familiar with HL, but a quick search on their website yielded


    This seems to be a H class of this fund, perhaps H for HL?

    The various fund names are frustrating and not all providers sell every fund in every flavour.

    This page might help you


  • 6 AndyT April 4, 2017, 12:21 pm

    I guess another route one could go, if you want to simplify things a little but don’t want to go *completely* “boil in the bag” with something like LifeStrategy, would be to mix bonds with a Global All Cap fund like Vanguard’s “FTSE Global All Cap Index” (GB00BD3RZ582). It’s by market capitalisation and includes Emerging Markets and smaller companies (4,466 in total). It’s a touch more expensive at 0.24% but avoids some of the UK overweighting etc. of LifeStrategy. It would also mean you were buying/rebalancing less funds (which might save a bit if you were drip feeding, rebalancing regularly on a platform with dealing fees).

    You obviously lose the ability to slice and dice weightings precisely as suits you, but I’m tempted by that sort of approach for my ISA next year.

  • 7 Jaygti April 4, 2017, 12:41 pm
  • 8 Brain Unwashed April 4, 2017, 1:03 pm

    Excellent post. Well done TA.

    I’m toying with the idea of adding gold to my portfolio. I don’t really like the stuff, but Tyler over at Portfolio Charts (among others) makes a strong case for owning some, not least for its diversification properties when stocks tank:


  • 9 Chris Evans April 4, 2017, 2:51 pm

    Congratulations, but your out-performance is hardly ‘staggering’. Simply by keeping a portfolio of around 45 UK shares and investment trusts I have managed a 7.9% gain in the first quarter of 2017 and an annual gain of 14.2%. The only occasionally churned portfolio (with dividends re-invested) has out-performed the FTAS in all but 11 months of the last four years, in which time it has increased by 71.3%, compared with a rise of 18.0% in the FTAS.
    I still cannot see how anyone but a mathematical dunce can’t understand that, for everyone who makes a loss (as you keep assuring us most of us do, especially if active investors) somebody must make a gain, otherwise somewhere there is a massive heap of money owned by nobody. Where are these people? Apart from me, it would seem, they are all hiding under the bedclothes!

  • 10 The Investor April 4, 2017, 3:10 pm

    @Chris Evans — We’re aware of the fact that winners and losers marry up…


    …although strictly speaking I’d point out we should say “for every pound” rather than “for everyone” when discussing this.

    The issue is in aggregate active investors under-perform due to higher fees. Of course there are winning active investors. If you’re one of them then well done! 🙂

    Most people invest actively via funds, and the overwhelming evidence is most funds fail to beat the market over the long-term. As you didn’t seem to understand in our political debates (interesting to see you’re still here…) “most” or even “some” does not equal “all”.

    Finally, @TA didn’t say the ‘outperformance’ is staggering. He said the *performance* was staggering. I’d agree he’s possibly easily staggered, but the point he is making is a lower-risk portfolio (over 30% in government bonds) is delivering great returns, by his measures.

  • 11 Chris Evans April 4, 2017, 3:53 pm

    Fair point, especially about the pound for pound rather than my person for person. I am still amazed at the extent to which losses due to fees apparently outweigh gains. That really must be a lesson for us all!

  • 12 GRG April 4, 2017, 3:58 pm

    @ The Investor re Chris Evens, exactly well said.
    @ AndyT I’m with you regards th Vanguard Global All Cap. I’m going to start a new ISA with a new broker on the 6th using the Vanguard All Cap and the Blackrock Gilt Tracker to test out the Lars Kroijer.

  • 13 dearieme April 4, 2017, 6:05 pm

    The other advantage of passive investing in tracker funds is that active investing must be balls-achingly boring.

  • 14 mick April 4, 2017, 6:49 pm

    Hi All,

    A very interesting thread and one I follow closely as i’m looking to take on the management of my sipp instead of paying 1.4%pa to a discretionary manager plus active fund fees!

    I would like to back test a portfolio like this against a slightly tweaked HSBC Dynamic against the 20 funds I have been allocated which is seemingly a ‘standard’ configuration for my risk level.

    I looked at portfolio visualizer but it doesn’t seem to recognise many of the funds I hold.

    Any alternatives?

  • 15 The Rhino April 4, 2017, 8:10 pm

    @ChrisEvans – how can you keep a lid on trading costs when you hold 45 equities/ITs? Are you paying anything to have dividends reinvested? Do you have a rebalancing strategy?

    Unless the value of the portfolio is huge, I’m unsure as to how you could run it without incurring excessive costs?

  • 16 Alex P April 4, 2017, 9:42 pm

    This website is amazing – though my “wealth manager” would disagree as it contributed to him getting the sack for Christmas, something I reckon will save me literally thousands of pounds a year straightaway.

    @ TA: some questions that I think some of your readers might like to see asked:

    1. Now that Vanguard has brought out a truly global, all cap fund that includes emerging markets (GB00BD3RZ582), I would love to invite your comment on the merits of that vs the equity portion of your slow ‘n’ steady portfolio. The cost difference is only a few bps. Is it just the cost, or is there perhaps something in your weighting of the funds you have selected? I’d love to know, because I am in the process of moving my SIPP and ISAs out of the various active funds they have hitherto been invested in and VG’s global all-cap tracker seems like the broadest and most diversified single fund there is.

    2. What are your reasons for using the BlackRock EM fund as against Vanguard offerings such as VFEM (IE00B3VVMM84) or the Vanguard Emerging Markets Stock Index Fund (IE00B50MZ724)? The fund you have chosen is cheaper than these by 5 and 3 bps respectively. Is there more to it than that?

    Finally, to anyone else considering the merits of cutting fees associated with “wealth management”, have a look at this calculator, which I regularly goggle at: http://ig.ft.com/sites/isa-calculator/

    Keep spreading the word!

  • 17 Chris Evans April 4, 2017, 10:20 pm

    @Rhino I only deal (sell plus buy) on average about four or five times a year, so a churn rate of only around 10%. I suppose that makes me more of a passive than active investor and my principal strategy is buy and hold; this does, of course, keep down dealing costs. I allow dividends to accumulate as cash and then use this to add to existing holdings or buy new ones but by doing some re-balancing (about which I am not as concerned as with individual performance, e.g. I have been heavily overweight in housebuilders since their crash in 2008) the number of holdings remains materially the same. In my portfolio dealing costs in an average year represent only about 0.15% of portfolio value and so can be considered negligible.

  • 18 Fremantle April 5, 2017, 7:48 am

    @Alex P

    That Vanguard FTSE Global All-Cap Index Fund looks like a a more diversified version of HSBC FTSE All-World Index Fund, which is marginally cheaper at 0.2% OCF.

    The only difference (besides provider) appears to be the index they track. Having to hold more securities probably explains the cost difference. The value of additional diversity is probably diminishing, but it is good to see some more competition in the global equity tracking market.

  • 19 The Rhino April 5, 2017, 10:07 am

    @ChrisEvans – ah ok i see, a ‘permaculture-portfolio’, buy, hold and hope everything grows in perfect harmony..

    0.15% trading costs per annum is none too bad though, especially for that many holdings

  • 20 Naeclue April 5, 2017, 12:40 pm

    @dearieme On the contrary I am sure many investors are active because they crave the excitement. I prefer to invest passively and get excitement elsewhere.

  • 21 Gabycaby April 5, 2017, 1:38 pm

    Hi guys love the site and all the helpful posts, i have the vanguard lifestrategy 80% now looking for a uk bond fund a suggestions would be helpful.

  • 22 john Campbell April 5, 2017, 2:09 pm

    I look forward to reading the S&S updates every quarter as i’ve been following the beginner’s route in my SIPP with Vanguard LS 60 (93%) and the Blackrock Global Property Tracker (7%)….with intention to align when my level of understanding permits.

    Note your 14 years away from target 40/60 and presently 68/32 Equities Bonds.

    Whilst i’m happy with my present 50/50 asset allocation and 5 years out figures, i just cant work out what to do with the 50% Bond section if i were to align with S&S, which is my intention.
    Something just doesn’t fee right in choosing , assume using the same funds as S&S currently, to choosing eg.
    40 % Vanguard UK Gov Bond Index Fund
    10% Vanguard UK Inflation-Linked Gilt Index Fund

    or something like :

    30 % Vanguard UK Gov Bond Index Fund
    10% Vanguard UK Inflation-Linked Gilt Index Fund
    10% cash

    It may be simply down to irrational thoughts over having a high proportion in the two bonds funds …i.e a perhaps misplaced wish to complicate this side of things as its proportion increases.
    I’ve also noticed that in the Vanguard Target Funds glidepaths , the tend to increase the proportion of linked bonds to the short and medium term Gilts.
    Wonder if the S&S authors (TA , Greybeard perhaps) would ponder a roll forward in time, sticking to the 2% move & speculate how they might deal the larger proportion of the Bond side as the years roll on.

    Also interested to read others comments on Vanguard’s FTSE Global All Cap Index, which might provide another answer for my simplified 50% Equity side soon…. my plan a was to convert 50% of my Vanguard VLS 60 into VLS 40 going forward … retain the 7% property if i retain my packaged status quo.

    But it’s the 50% Bond allocation that’s giving food for thought. I’m nearly there though, and i will be a real and substantial (to me) S&S variant when i get my head around the Bond questions. Thank You again.

  • 23 John April 5, 2017, 6:39 pm

    I don’t understand how an investor can buy less than one unit of a fund. I’m switching to ETFs from ITs; it appeared that I was limited to which funds I could buy based on the amount I have to invest each month. Can you explain it please? or a link to an article that does?

    Many thanks, keep up the great work.

  • 24 Percy Sugden April 5, 2017, 11:25 pm

    Hi all,

    How does the aforementioned “Vanguard FTSE Global All Cap Index Fund” stack up against the Vanguard Life Strategy Fund?

  • 25 GRG April 6, 2017, 10:08 am

    @Percy Sugden the Global All Cap Fund has a greater diversification across countries and market capitalisations and doesn’t have the home bias that the LS fund has. It is 100%
    equities so if you want to water things down you will need to get a bond fund unlike the LS.
    You can get the details from the FTSE Russell web site.

  • 26 Gadgetmind April 6, 2017, 2:20 pm

    We topped up my wife’s SIPP last week (we put all of her small income into it) and will do this year’s S&S ISAs next week. I just download the portfolios as spreadsheets, cut and paste into my master sheets with fixed target allocations, and buy and sell as the equations dictate. I have 5% of each portfolio for active dabbling. This is labelled “themes” on the spreadsheet but should perhaps be called “It seemed like a good idea at the time”!

  • 27 Louis April 6, 2017, 2:21 pm


    I recently discovered your website and I have found it both interesting and useful in informing my investment decisions. Thank you for that.

    Excuse my naivety, but why did you choose for the The Slow and Steady portfolio to contain Dev World ex-UK, UK and Emerging Markets trackers rather than one total world equity tracker, as suggested by Lars Kroijer?

    Kind regards,

  • 28 Alex P April 6, 2017, 2:56 pm


    The FTSE Global All Cap fund is a simple tracker that follows an index of equities of all sizes (Mega, Large, Mid and Small) from developed and emerging markets (the FTSE Global All Cap index) that is put together by the FTSE group, which is a subsidiary of the London Stock Exchange. Vanguard do not make the index, but they offer this product of those who wish to track it. The index is weighted according to the market capitalisation of each company (meaning the total value of all their shares)

    Your post refers to the Lifestrategy fund but there is no one such fund. Lifestrategy is the name given by Vanguard to a series of funds that they offer. The idea behind these is that they offer a mixture of other Vanguard funds, so that instead of buying lots of VG funds you just buy one of these. There are 4, I think. The difference between Lifestrategy and the single tracker is twofold.

    First, a Lifestrategy fund is split between equities and bonds, so you have a 20/80, a 40/60, an 80/20 and finally a 100/0 fund which is invested entirely in equities. You decide on the split that you like the most. The standout feature is that VG will take care of all the rebalancing – thats, they will keep the split at whatever you chose, buying and selling as required.

    Secondly, the equities portion of the Lifestrategy fund is not a carbon copy of the index tracker you have asked about. That tracker slavishly follows an index that weights its components by their size; the LS funds offer a weighting, made up of other VG funds, that is noticeably different. No doubt they have done their research and figure that LS customers will like the weightings they have provided. Most noticeably, whereas in a global tracker UK companies will amount to about 6% of the total, in the LS funds just over 18% follows the UK All share index. Smaller slivers follow the FTSE 100 and the FTSE 250. The result is that the UK is given about 3 – 4 times as much presence within the LS fund as it would be in pretty much any global tracker. This is called “home bias”. As it happens my IFA put me into the VG 100% equity fund a few years ago – it has performed marvellously.

    Just to return to rebalancing, if you go onto VG’s website and look at the list of funds that make up one of the LS funds, you can see down to 1 decimal point the proportion of the whole that each bond and equity fund constitutes. As well as keeping the overall Equity/bonds split constant (60/40 or whatever), presumably they also rebalance within these portions to keep the individual funds at their predetermined levels. In other words, they do an enormous amount of work so that you don’t have to.

    Hope that helps – I am just a retail investor who has learned al this within the last 12 months.

  • 29 Alex P April 6, 2017, 3:05 pm

    Hi – if you have the LS 80/20 then 20% of your fund is already in bonds. Have a look on the vanguard website and click on your fund. Are you sure you need more bonds?

  • 30 Alex P April 6, 2017, 3:20 pm

    As best as I can see it is because you can achieve the same result for about 0.1% less cost. I use a single tracker so I can easily measure other investments against “the market”. Also because using several funds makes it unbelievably convoluted when my investments are spread across ISAs and SIPPs for each member of my family. Trading costs also add up on my platform.

  • 31 Alastair Wright April 6, 2017, 7:22 pm

    Hi, I’m a great believer in globally diversified passive portfolios too, but why use so many different funds?
    I only use Vanguard Lifestrategy which seems to cover all the options without any need to rebalance. What are the possible downsides of this strategy, apart from the possible ‘eggs-all-in-one-basket’ aspect?

  • 32 The Investor April 6, 2017, 9:18 pm

    @all — Hi, the LifeStrategy question comes up every update (and indeed the article ends saying you can do that 🙂 ) so easiest to refer to @TA’s last reply:


    To that I would add that a model portfolio of one fund isn’t very instructive as an educational tool. 🙂

    I believe that over time revealing the constituents of the balanced passive portfolio is going to provide lots of teaching moments showing how it all fits together, when not to panic about this or that asset, and whatnot. As indeed it already has over the past six years…

    For instance it doesn’t happen so much right now, but a couple of years ago people were questioning the US allocation. We’ve also had perennial questions about the bonds. And when (note *when*) the market tanks someday people will say why not 25% cash and 25% gold, etc. I think this sort of thing is more explainable, especially to new investors, via the multi-fund approach we’re going for here.

    Finally, we were just about the first site to write in depth about LifeStrategy, and this model portfolio pre-dates the launch of the latter by at least six months. We’ve started so we’ll finish! 😉

  • 33 Alex P April 6, 2017, 9:33 pm

    That’s a helpful reply and to be honest the fact that it is broken down as it is did probably do a lot to get me thinking about how to go about combining assets. Might I ask whether there is anything esoteric in the weightings you have chosen, or are you simply trying to make the S&S portfolio track the MSCI ACWI?

  • 34 Percy Sugden April 6, 2017, 10:06 pm

    Hi all,

    If someone is 20+ years away from retirement, and their pension pot is lower than it should be at this stage, is it best to be 100% equities, rather than say a VLS80?

    It seems to me that the 20% bonds in the VLS80 are simply a safety net… but with 20+ years until retirement is that necessary?

  • 35 Percy Sugden April 6, 2017, 10:07 pm

    @Alex P and @GRG: Thank you both very much for the above!

  • 36 Alex P April 7, 2017, 7:55 am

    There will probably be times in those 20 years when the 20% bonds is the best performing part of your portfolio, but you can’t know when or for how long.

  • 37 Fremantle April 7, 2017, 9:55 am

    @Percy Sugden

    Bond allocation is a balance between your risk tolerance and your required return rate. The lower your bond allocation, the higher your risk and you’ll see greater fluctuations in your returns.

    There are many resources for assessing your own risk tolerance and it is important to understand as it will give you a better chance at sticking to your plan when either your selected strategy seemingly under performs long term expectations and you’re tempted to change up to chase returns or when a serious market downturn occurs and you’re tempted to reduce your equity exposure. The time to decide your strategy is at the beginning and at regular periods during your time horizon, but not in response to a crisis to enable dispassionate assessment.

    All good words, harder to implement. My investment journey began reading Tim Hale and I can certainly recommend Smarter Investing.


  • 38 Percy Sugden April 7, 2017, 10:21 am

    @freemantle – many thanks for that feedback.

    I have a high tolerance for risk as far as my SIPP goes. I am 40 years old, and my SIPP’s value is about 1/2 the amount that is recommended for my age (£100K). I won’t need to access this money for another 20 years or so.

    Therefore, I’m wondering whether VLS80 is not aggressive enough… or if it is about right, and that the 20% bonds are a good thing which will help overall.

  • 39 The Rhino April 7, 2017, 10:45 am

    @PS – a common approach is to taper asset allocations as you approach pensionable age, a rule of thumb being hold your age in % bonds, i.e. at age 40 have a 40:60 split bonds, equities.

    Your mileage may vary though as everyones different both in their material circumstance and how their brain works..

    Good job you don’t need to access it for 20 years as you can’t access it for 20 years! (or thereabouts, the age limits seem to change constantly, but always in an upward direction)

    Terrifying that 100k aged 40 is only 1/2 recommended amount, I’m of a similar vintage and have less again in my SIPP.. oh dear..

    Do have a few other cards up my sleeve though

  • 40 Percy Sugden April 7, 2017, 11:12 am

    @The Rhino – £100K is the recommended amount that a 40 year old old should have. I have half this amount.

    A SIPP with 40% bonds would seem to me to be too tame for a 40 year old who is lagging behind and still have 20+ years until the money is needed. As I say, I think my current asset allocation of 80% equities and 20% bonds is possibly too tame…

    But perhaps I am being too bullish because I have yet to experience a bear market as an investor…. but on the other hand, as I say, i don’t need this money for 20 years+ so bear markets don’t faze me. Indeed, there will possibly be a few bear markets before I am able to use my pension!

  • 41 The Rhino April 7, 2017, 12:19 pm

    I have a sneaky suspicion the old risk appetite questionnaires are complete bullshit. It probably takes a good few actual bear market blood-baths to figure out where you sit?
    I’ve lived through 2 so far as an adult in charge of assets, but the next ones going to be where I learn something, as I have a lot more skin in the game now..

  • 42 Brain Unwashed April 7, 2017, 12:33 pm

    Possibly a bit off-topic, but I still think the elephant in the room question right now is bond duration particularly in the context of overall asset allocation. I’d love to see an article on this topic.

  • 43 The Rhino April 7, 2017, 12:40 pm
  • 44 The Rhino April 7, 2017, 12:45 pm

    I think that Hale may have covered this issue in his latest edition as well, i.e. changing your asset allocation on the bond side due to the issues surrounding long-dated gilts and where interest rates might go in the future..

  • 45 Brain Unwashed April 7, 2017, 1:38 pm

    @The Rhino. Kind of, although that article mainly seems to focus on linkers and suggest that shorter is better than longer, which I can understand. It’s not the approach taken by something like The Permanent Portfolio or Tony Robbins’ All Weather Portfolio though which use very long term bonds to offset the volatility of stocks. Another discussion for another day perhaps….

  • 46 Percy Sugden April 7, 2017, 1:42 pm

    @The Rhino – I think the key thing here is that a single “risk appetite” assessment doesn’t cover all investments. I have a moderate risk appetite for my ISA and trading accounts because I will likely need that money at some point in the short/medium term and I don;t want to find it’s lost a load of value all of a sudden just when i need it. However, my risk appetite for my SIPP is a completely different story. If my SIPP value halves overnight I will not be worried at all because I am 40 years old and it has literally decades to grow. My risk appetite for my SIPP is high.

    So when talking about risk appetite, you have to first of all establish what type of investment it is you’re talking about.

  • 47 The Rhino April 7, 2017, 2:37 pm

    @PS – I agree, my SIPPs are more aggressive than my ISAs for that very reason

  • 48 The Rhino April 7, 2017, 3:07 pm

    @BU – but tucked within that article on the potential dangers of inflation linkers possibly not doing their job is the more general observation about the susceptibility of long duration bonds to changes in interest rates. Is that the concept you are worried about?
    I have heard people say that long duration gilts are very likely to perform poorly due to the likelihood of interest rates heading up rather than down in the future, i.e. not so much upside but potentially a lot of downside..
    In other words the freakishly low interest rates we are currently experiencing have a bearing on the more generally accepted wisdom of holding longer duration bonds which I believe is that they offer a better rate of return over shorter duration bonds?

  • 49 Brain Unwashed April 7, 2017, 3:28 pm

    @The Rhino. Re long term bonds – I was thinking more in terms of their response to large drawdowns in equities rather than their yields.

  • 50 The Rhino April 7, 2017, 3:33 pm

    @BU – I’m not sure what the differences are in correlation between equities and short vs long duration bonds is – as you say maybe food for an article, but I wouldn’t be surprised if it were already lurking in the back-catalogue somewhere!

  • 51 The Rhino April 7, 2017, 4:32 pm

    @BU – did a bit of digging, is this relevant/of use?


  • 52 Brain Unwashed April 7, 2017, 7:46 pm

    @The Rhino. Thank you. It is useful yes.

  • 53 MSEreader April 9, 2017, 7:57 am

    Hi, first timer here.
    This portfolio was recently criticised on MSE for being non steady and high volatility.

    Do you have some comparison/evidence that demonstrates its “steadiness”? Perhaps that evidence is more about the asset mix (efficient frontiers?) that is being tracked than a comparison versus other portfolios?

    How does one address views from some IFAs on such boards that portfolios like slow and steady, and VLS, are “easy to beat”? With what I’ve read on monevator this sounds like mis-selling, but still IFAs are allowed to suggest they know how to beat passive portfolios, it seems incongruous to the I in IFA.

  • 54 The Investor April 9, 2017, 11:27 am

    @MSEReader — Hello! I suppose we could work out / graph the volatility and whatnot from the quarterly updates, but that’s not really the meaning of the title. I suspect our idea of ‘Slow and Steady’ is on a different time horizon to the critic’s.

    If we only updated annually, that would be clearer. If we only updated every five years it would be clearer still!

    But we’d have no readers, and nobody would be learning anything from the model portfolio (including us!)

    We’re not claiming it’s a magic sauce low volatility asset mix or anything like that. It’s Slow and Steady in the sense that over 20 years we think it will deliver decent returns, in the same conversation but a little below the returns from if you’d been all-equities, but with less dramatic drawdowns in crashes (especially compared to funds/strategies/ventures that promise the world and often charge you for it.)

    In my view, even these days with the very welcome introduction of the likes of Vanguard LifeStrategy that make things so easy, the average aspirant wealthy person who is saving a decent 10-20% of their salary’s non-property asset mix likely consists of either too much cash, or too much in random expensive UK actively managed equity funds, or in some hodgepodge of directly owned shares, maybe too much UK residential property exposure (BTL etc) plus a pension where they don’t even know how it’s invested.

    People who aren’t like that and are reading Monevator — or MSE for that matter — are not even a large minority.

    It’s useful too to think of the counter-factuals — in a dotcom crash or even a 2008, this portfolio isn’t going to blow up (though it would certainly decline sharply). In a situation like the currency devaluation we’ve had, it’s going to capture some of that versus someone who was just sitting in cash in ISAs / P2P. In a theoretical UK house price crash that blows up BTL, it will keep chugging along. And so on.

    i.e. The idea of the S&S is to just show how a simple collected of cheap tracker funds can get the job done over 20 years for nearly everyone. It’s not claiming to be magic. It has plenty of equity risk, and despite the bonds it will be volatile for sure.

    Re: The IFAs, well of course these geniuses are on the bulletin boards posting when they could be working for hedge funds making billions from their edge. 😉

    Anyone can say anything. Here are the latest stats (my bold):

    S&P has just published its scorecard S&P Indices Versus Active Funds (or SPIVA) Scorecard for the the UK and Europe for the calendar year 2016. As far as the UK asset managers are concerned, here are the headlines:

    Nearly nine out of ten UK active equity funds underperformed their benchmark over one year. The exact number is 87.22%, which represents a four-fold increase on 2015.

    UK active funds have also fared poorly over longer periods, with 61.64% of funds underperforming over three years, 50.0% over five years and 74.19% over ten.

    Average UK active equity fund performance also lagged the benchmark over the calendar year, with active funds delivering an average annual return of 11.15%, which is 5.95% less than the S&P United Kingdom BMI over the same period.


    Those stats do not preclude some people outperforming. It can be done. It’s just not likely for the averagely lucky person.

    If someone wants to try their hand, be my guest (I personally do pick stocks, unlike my co-blogger who wrote this article). Take honest records, and after 10 years you’ll know if it was worth the time and extra risk. Of course that’s 10 years you can’t get back to compound your wealth, if it turns out you’re not in the lucky / skilled minority. Most people needn’t take this risk.

    Unlike many who urge the average person to invest passively, I fully understand the attraction of the alternative approach. But it has a seductive quality to it in the worst sense of that word. It’s not even just that I believe most people will fail to beat the market return. I don’t even think most people have the knowledge / interest in tracking / intellectual honesty to know whether they beat the market or not.

    In short, investing geniuses are two a penny on the Internet, and yet for some reason most very highly paid fund managers fail to beat the market over the medium to long term.

    I think we can draw our own conclusions. 🙂

  • 55 MSEreader April 9, 2017, 11:30 am

    That is a wonderful response. Thank you for taking the time to consider, mucho appreciation (no pun intended).

  • 56 Percy Sugden April 9, 2017, 1:23 pm

    @The Investor – thank you very much for that response.

    What Slow & Steady does lay bare, completely anatomically, what your portfolio is and how it performs each quarter. You show it’s nuts and bolts for the world to see and criticise.

    Compare that to random posters on chat boards. They insist they do better. They talk down VLS/Slow & Steady. But they never tell you what their master plan is. Never reveal their hand.

    There is is only one person I have read on one message board I frequent who was as honest about his portfolio as you are with Slow & Steady. He didn’t pretend to be an expert, I must point out. He was humble about his learning process. But he did say that had he made the opposite choices to all the choices he had made as an active investor that he probably would have made more money!

    I suspect that kind of honesty, and clarity is often lacking with a lot of active investors, whom I personally suspect are not doing quite as well as they’d have you believe. (But I/we will never know if this is true as they will never reveal their portfolio).

  • 57 The Accumulator April 9, 2017, 8:12 pm

    @ BU – yes, long bonds historically perform somewhat better during a crisis than short or medium bonds. However, given where interest rates are, you’re taking on a huge risk with long bonds for a relatively small upside. Medium bonds will also perform well in a crisis and be less exposed if rates rise. It’s about the balance of risks. The long bond portions of the portfolios you mention have benefitted greatly from the fall in interest rates over the last 30 years which did wonders for their returns.

  • 58 The Accumulator April 9, 2017, 8:19 pm

    @ Percy – theoretically 100% equities can be *expected* to outperform 80:20 or 60:40 or any other combo of equities and bonds. That doesn’t mean it will. If equities tank for the next 20 years then you’d regret your lack of diversification. If you miscalculated your risk tolerance and couldn’t handle a 100% equity portfolio in the midst of a massive crisis then you’d regret it even more.
    I’m not trying to say you’re wrong. Just developing the counter-argument. These two pieces may help:



  • 59 The Accumulator April 9, 2017, 8:21 pm

    @ John – you can buy less than one unit of a fund but not ETFs.

  • 60 The Accumulator April 9, 2017, 8:25 pm

    @ John Campbell – I couldn’t work out from your comment what’s really troubling you about your bond allocation. How many years out are you from deaccumulating?

    Main thing is match your bond funds duration with your time horizon.

    Read this on the subject of inflation-linked gilts: http://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/

    Use short-term bond funds rather than medium or long if you’re worried about inflation, interest rate rises or have a short time horizon.

    Don’t get into corporate bonds.

  • 61 The Accumulator April 9, 2017, 8:34 pm

    @ Louis – as The Investor mentioned the S&S portfolio predates total world equity trackers. All the same, you may well find it hard to find a total world tracker that adequately represents emerging markets. You may also decide you want to up your exposure to risk factors like small cap. If you want convenience and simplicity and to head off the desire to meddle like a crazy chimp then definitely plump for the total world tracker.

    @ Alex P – the same goes for why you might decide to run your own set of funds versus the Global All-Cap tracker.

    The BlackRock Emerging Market tracker got the nod purely because it was cheaper. The S&S portfolio is funds only so VFEM wouldn’t be in the frame as it’s an ETF. Not that I have a problem with ETFs. It’s just funds keep things slightly simpler.

    Well done on offing your wealth manager and thank for the calculator link – looks useful.

  • 62 The Accumulator April 9, 2017, 8:40 pm

    @ The Cardinal – The charges I listed are available with most platforms. I could only find BlackRock EM tracker A & H on Hargreaves and your link gave me a page not found. Anyway, If you’re on Hargreaves and likely to stay there for a long while then use the H class. Hargreaves convinced BlackRock to give them a slightly cheaper version of the same fund.

  • 63 Percy Sugden April 9, 2017, 8:56 pm

    Are VLS bonds short, medium or long term? What I’m asking is: are they likely to take a hit when interest rates go up?

    My mortgage is linked to BoE interest rates, and so I don’t want to take a double hit when interest rates start going up.

  • 64 The Accumulator April 9, 2017, 9:13 pm

    Looks like they’re a mix. BOE interest rates aren’t the same as bond interest rates, btw, although they are linked. If rising interest rates meant the economy was booming then your equities might be doing so well that they’d compensate for a lacklustre performance from the bonds. On other hand, if rates are going up because inflation is out of control then general misery is nigh.

  • 65 Percy Sugden April 9, 2017, 9:57 pm

    Many thanks indeed, TA!

  • 66 john Campbell April 11, 2017, 9:31 am


    Re. the bond allocation in my putative 50/50 S&S venture…

    3 years left to accumulate until age 61, then stop working as present, no likely further contributions. Saving hard into it presently.
    Then drawdown hard until age 63 when modest db scheme starts, balance of sipp drawn down until SP at aged 66….any residual sipp a bonus after 66.

    I have difficulty figuring the bonds out ….assuming same 2 funds as in current S&S , and retaining your proportions re. the short/medium Gilts in the Vanguard fund and the Linked fund , i’d end up with something like:

    Vanguard UK Government Bond Index 40%
    Vanguard UK Inflation-Linked Gilt Index Fund 10%

    Note i haven’t yet started to drain any of the sipp into cash either.
    It’s the high percentage of the UK gilt fund that bothers me …but possibly because of an irrational feeling as it’s such a high relative % for the UK Gilts.

    In respect of other comments on the LS funds…i’m using these currently purely as a learning exercise until i’ve got my own S&S variant at least half baked …and happy to run as a real not a notional proposition.

    Previous posts as hyperhypo ….i don’t know what possessed me to put my real name down last post but it was done before i realised i’d done it …no drink taken either.!

  • 67 Toby April 13, 2017, 7:06 pm

    Hi there,

    Sorry if my question has an obvious answer but HL only allow me to invest a minimum of £100 into each separate fund in my SIPP. This makes rebalancing a nightmare, especially as I don’t want to sell and rebuy my portfolio every few months to achieve the right allocation.

    How important is it (within 1-2% maybe?) to hit the planned allocation in the portfolio?

    Thank you for your help and for helping me to understand how to invest for the future!

  • 68 Alex P April 13, 2017, 7:43 pm

    It isn’t very important at all. if it’s easy to achieve then fine, but it isn’t anything to worry about if you’re a few points off here and there

  • 69 The Accumulator April 19, 2017, 2:17 pm

    @ John – if that is indeed your real name ; -)

    So, you’ve 8 years before you intend to spend the entire SIPP down? Would you be able to delay selling the equity portion if there was a crash between now and then?

    That Vanguard bond fund has a duration of 12. Which means it will take approx 12 years to recover from any loss if interest rates rise.

    If I wanted bonds to be a source of stability between now and 8 years time then I’d go for a short-term gov bond fund / ETF. The duration will be about 3 which means it’d take the fund 3 years to recover a loss from an interest rate rise. Much less risky, and less vulnerable to inflation too as maturing bonds are sold more quickly for new higher yielding varieties.
    To get under duration 3 you’d mix with cash / money market funds.
    Initially wrote monkey market funds. I’d love to add those to my asset allocation 😉
    I wouldn’t use the linker fund – duration is 25 or so from memory. If you are very worried about inflation then you’d be better off creating a linker ladder from individual index-linked gilts. You could also do this with your nominal gilts to solve your duration problems but it will take some research. Effectively, you’d buy individual gilts through your broker that mature and can be spent between the ages of 61 and 66. It’s a one-time ladder that could also be achieved through savings accounts – though not in your SIPP.

    Hope that helps. Bonds are tricky.

  • 70 john Campbell April 20, 2017, 10:18 am

    @TA , yep JC is my real name and i deserve my stall in the Monkey Market. And yes, i’m trying to set my sails for a “I’m most likely further down Cemetery Road than you are” version of the S&S. Thank you for taking trouble to consider this variant ….

    Your understanding of time pretty correct…8 years, first three years continue work / accumulate phase, next two years heavy drawdown have been covered by draining into cash , starting now, as this will be exclusive income for me. Final phase from start of db scheme until SP at 66.
    So yes , perhaps my fondness for the 50/50 Markowitz formula needs a bit more thought and perhaps a far more conservative tilt.

    And i believe i’ve been wrong in thinking that i can achieve this lifestyling the Vanguard LS funds (i.e combining VLS 60/40 or even VLS 40/20) as none of these appear to contain specifically short term bond funds.

    I’ve also done some reading on the Vanguard Target Retirement funds and again put off a bit as e.g. the 2025 variant appears tilted 70/30 towards equities at present , which seems a bit adventurous to me.

    So perhaps a combination of

    Global equity fund,
    short dated Gov bonds

    or use a 40/60 version of the current S&S with its two bond funds replaced with short dated Gilts and cash.
    That sounds more like it.

  • 71 inavest May 16, 2017, 1:01 am

    Could you explain why you changed the target allocations from previous versions of the portfolio?
    q1 2016: Index linked gilts 15%, UK gilts 15%
    q1 2017: 7% and 26%

  • 72 The Investor May 16, 2017, 8:59 am

    @inavest — Good spot, see the first article below for the backstory, and the second for when we made the change and why:



Leave a Comment