[1]The second update of the Slow and Steady passive portfolio takes place against a backdrop of global doom and gloom. Eurozone ministers fiddle while Athens burns [2] and the talking heads ponder every scenario – from default to default plus meltdown of the financial system (part two).
Where does all this brouhaha leave our battered lazy portfolio? Roughly where it started!
The portfolio was set up [3]at the start of the year with £3,000 and an extra £750 is invested every quarter into a diversified set of index funds, heavily tilted towards equities.
Missed an update? Catch up on all the previous passive portfolio posts [4].
The results are in
The portfolio has ticked up 0.85% since launch for a whopping cash gain of £31.96. That’s £14.12 earned in the last three months. Sweet dreams are made of this.
[5]Since last time [6]:
- The US fund remains in the black but has lost nearly half of its initial gains1 [7] as America’s recovery runs out of puff and growth figures are revised down.
- Meanwhile, Europe continues to motor ahead, despite everything – maybe the doom-mongers have been exaggerating?
- The FTSE is bumping along going nowhere fast, which feels about right. Still, we’ve had the VAT rise, the onset of George Osborne’s austerity measures and carnage on the High Street since the last update, so we’re getting off lightly.
- Japan was the big laggard last time, post-Tsunami. It’s still down but slowly recovering.
- The Pacific continues to edge down. This fund is dominated by Australia so could be feeling the slowdown in commodities and the rises in interest rates.
- UK Gilts gain as fear stalks the land. Our bond holding registered the portfolio’s second biggest loss last time, but has swung around to notch the highest gain this quarter. Its performance this quarter is a shining example of bonds as buoyancy aid, shielding the portfolio from equity volatility.
- Emerging markets [8] are now the biggest drag on the portfolio as overheating takes the steam out of Chinese growth.
Whatever the causes, we’re talking about dips and gains that amount to a few pounds. Despite the red-hot newswires, the market remains flat.
Still, it’s a long-term game for passive investors – we’re relying on low costs, diversification and the risk premium [9] to reward us in the future. Perhaps the far-distant future of foil suits the way we’re going.
New purchases
Time to throw in another £750 of our carefully husbanded cash and rebalance the portfolio [10] as follows:
UK equity
HSBC FTSE All Share Index – TER 0.27%
Fund identifier: GB0000438233
New purchase: £153.02
Buy 43.0690 units @ 355.3p
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: £218.76
Buy 113.8771 units @ 192.1p
Target allocation: 27.5%
European equities excluding UK
HSBC European Index – TER 0.37%
Fund identifier: GB0000469071
New purchase: £87.35
Buy 16.6858 units @ 523.5p
Target allocation: 12.5%
Japanese equities
HSBC Japan Index – TER 0.28%
Fund identifier: GB0000150374
New purchase: £33.47
Buy 53.2813 units @ 62.81p
Target allocation: 5%
Pacific equities excluding Japan
HSBC Pacific Index – TER 0.37%
Fund identifier: GB0000150713
New purchase: £38.63
Buy 15.708 units @ 245.9p
Target allocation: 5%
Emerging market equities
Legal & General Global Emerging Markets Index Fund – TER 0.99%
Fund identifier: GB00B4MBFN60
New purchase: £84.25
Buy 162.9317 units @ 51.71p
Target allocation: 10%
UK Gilts
L&G All Stocks Gilt Index Trust: TER 0.25%
Fund identifier: GB0002051406
New purchase: £134.51
Buy 83.9663 units @ 160.2p
Target allocation: 20%
Total cost = £749.99
Cash = 1p
Total cash = 5p
Trading cost = £0
We rebalance [10] to target allocations every quarter using new contributions. It’s a no-brainer as our plain ol’ index funds don’t incur trading costs.
Take it steady,
The Accumulator
- Note, I’m talking cash returns since the last update. I’m not referring to the gain/loss percentage since purchase. Same goes for all the other funds. [↩ [15]]