≡ Menu

The Slow and Steady passive portfolio update: Q3 2020

The Slow and Steady passive portfolio was up in the third-quarter

For a relatively flat quarter, things don’t half feel nervy at the moment. Our Slow & Steady Passive Portfolio scraped a 2% gain over the last three months. We’re up year-to-date by a miraculous-seeming 5%.

All hail massive fiscal expansion! It feels about as real as a cartoon character running on air after running out of road.

Don’t look down! But do look at these soothing quarterly numbers brought to you by Pangloss-o-vision:

The annualised return of the portfolio is 8.94%.

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 £976 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and catch up on all the previous passive portfolio posts.

Age of uncertainty

The thing about living in an age of uncertainty is that even a week feels like ages. It’s as though each revelation from the relentless drip-feed of my news app must herald some fate-altering butterfly effect.

Every crunch of the COVID statistics, every mood-shift in the US polls, every whisper about the President’s health pushes a button – demands an urgent update of my world view, working practices, and portfolio position. It’s a switchback ride between exhilaration and exhaustion. No wonder we’re hyperactive.

Unless we’re passive investors, of course. In which case we try to sit back and enjoy endure the ride.

There must be something you can do, Dr Accumulator?

One of the less acknowledged truisms about our portfolios is that they represent mini-models of the world through which we try to impose order on the chaos.

Like playing Sim City or building a model railway, our portfolios enable us to pull levers that make us feel like we’re in charge. For a few precious minutes at least.

There’s clearly a correlation between anxiety level and portfolio change. I spent an afternoon wondering what I should change about the Slow & Steady portfolio to bolster it against the paradigm shift that surely must have occurred these last few months.

Doing nothing in these circumstances is like believing that JFK was shot by a lone gunman. Naive!

But what to do? Let’s run through the gamut:

  • Buy gold – the ultimate chaos insurance. Shame it’s already appreciated 20% in the last year.
  • Ditch bonds – who wants to earn negative yields? But there’s no better volatility buffer.
  • Investigate alt investments – feels like diving into a shark pool covered in tuna paste. These seem to be classic black box traps for investors wanting to believe in miracles.
  • Reread my Investment Policy Statement – like Van Helsing clutching a crucifix before the Prince Of Darkness. (Yeah, right! Does anybody ever do this? Ya, dweebs.)
  • Cut some costs – maybe, but our funds still look pretty competitive bar some new ETFs on the block that don’t yet have a convincing track record.
  • Change platform – Result! There’s something in this.

It turns out that moving our model portfolio to a new platform would cut our costs. It’s the one constructive change I can make that doesn’t require pre-cog ability, and it also usefully diverts my unquiet mind.

Change management

Right now we’re notionally paying 0.25% in platform fees on a portfolio valued around £57,000 – that’s £142 per year.

Move to Lloyds Share Dealing though and we’d pay:

  • £40 platform fee for our stocks and shares ISA.
  • £42 for a year’s worth of fund purchases (£1.50 x seven funds x four quarterly trades)
  • An estimated £12 for rebalancing sales1 (£1.50 x eight)
  • Total platform costs at Lloyds would be approx £94.

Or 33% less than our current outlay of £142, which is only likely to rise.

Okay, now that’s a change worth making – assuming Lloyds have the funds we want. I’ll investigate that and look to switch the Slow & Steady portfolio to a flat-fee broker in the next episode.

Otherwise, I’m just gotta sit on my hands. Where’s my passive investor’s bible?

New transactions

Every quarter we mix £976 into our financial cocktail while the Chancellor sprays everyone with punch. Our animal spirits are split between our seven funds according to our predetermined asset allocation.

We rebalance using Larry Swedroe’s 5/25 rule. That hasn’t been activated this quarter.

These are our trades:

UK equity

Vanguard FTSE UK All-Share Index Trust – OCF 0.06%

Fund identifier: GB00B3X7QG63

New purchase: £48.80

Buy 0.276 units @ £177.38

Target allocation: 5%

Developed world ex-UK equities

Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%

Fund identifier: GB00B59G4Q73

New purchase: £361.12

Buy 0.872 units @ £414.10

Target allocation: 37%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.29%

Fund identifier: IE00B3X1NT05

New purchase: £58.56

Buy 0.194 units @ £301.81

Target allocation: 6%

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.18%

Fund identifier: GB00B84DY642

New purchase: £87.84

Buy 50.922 units @ £1.73

Target allocation: 9%

Global property

iShares Global Property Securities Equity Index Fund D – OCF 0.17%

Fund identifier: GB00B5BFJG71

New purchase: £48.80

Buy 25.272 units @ £1.93

Target allocation: 5%

UK gilts

Vanguard UK Government Bond Index – OCF 0.12%

Fund identifier: IE00B1S75374

New purchase: £302.56

Buy 1.594 units @ £189.86

Target allocation: 31%

Global inflation-linked bonds

Royal London Short Duration Global Index-Linked Fund – OCF 0.27%

Fund identifier: GB00BD050F05

New purchase: £68.32

Buy 62.62 units @ £1.09

Target allocation: 7%

New investment = £976

Trading cost = £0

Platform fee = 0.25% per annum.

This model portfolio is notionally held with Cavendish Online, however they’d just announced they’re closed to new business. Take a look at our online broker table for other good platform options. Consider a flat-fee broker if your ISA portfolio is worth substantially more than £25,000.

Average portfolio OCF = 0.15%

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

  1. We’ve sold seven times in rebalancing moves this past year. []

Receive my articles for free in your inbox. Type your email and press submit:

{ 46 comments… add one }
  • 1 Old_eyes October 6, 2020, 11:01 am

    I am with Lloyds Bank Online Share service, and they have most of the funds you want. My portfolio is very similar to your Slow and Steady collection (by accident. I arrived via different route!).

  • 2 Spk October 6, 2020, 1:35 pm

    Given the reluctance from many investors to hedge their portfolio with bonds due to negative yields, has any analysis been done on markets like Japan and Switzerland on how the bonds reacted to the fall in equities this year? If bond prices moved up despite negative yields during the crisis, then bonds are still an effective hedge, though at a higher cost?

  • 3 Arabella Tullo October 6, 2020, 2:19 pm

    Does Interactive Investor get a look-in if you’re moving to a flat rate platform?

  • 4 IP October 6, 2020, 2:49 pm

    Been following monevator.com for some time. Love the weekly articles (Saturday morning) and the quarterly S&S portfolio updates.

    You’ve been a huge influence and I’ve since started up a stocks and shares account/investing last year.

    Slowly ramped up my contributions from £200pcm to £750pcm between the following funds:

    1. Scottish mortgage investment trust.
    2. Legal and general international index fund.
    3. Legal and general global tech index fund.
    4. Fundsmith Sustainable equity fund.

    Looking forward to just contributing monthly, checking 6 monthly and retiring early.

    Thanks for all your efforts and keep up the great work!!

  • 5 Jamers October 6, 2020, 4:24 pm

    Accumulator, please can you make a post (or link me to one) on how the retina-sear-o-vision spreadsheet is put together? I would like to replicate it for my own portfolio.
    Thanks!

  • 6 Whettam October 6, 2020, 7:04 pm

    Just interested @TA after this weekend’s reading by @TI, Golds 20% YTD performance and more generally performance of all weather portfolio’s, whether you have considered adding it in future to the S&S portfolio? E.g. Are you just not adding it at moment, because you think it’s expensive? (even passive investors are allowed this type of decision, in my book 😉 or might you consider it as an additional asset class in future.

  • 7 Richard October 6, 2020, 10:00 pm

    @Whettam – this is my dilemma (that I commented on the weekend links). Maybe an interesting article – how to approach adding asset classes to a mature portfolio (gold, property etc) where you would need to sell off a good chunk of existing assets. I guess as passive investors we shouldn’t really be taking a view, we should have a sold reason for including it and then find a way to include it that minimises the need to take any view. This could be just buy it now and hold your nose, there is a good chance in 20 years the price you paid today will be pretty irrelevant due to future ups and downs and rebalancing along the way. Or maybe slowly shift into the asset over years (1% year 1, 2% year 2 etc) to spread the price you pay over time and dilute the ups and downs out.

  • 8 Fremantle October 6, 2020, 10:39 pm

    The tweaks made to the SNS asset allocation and rebalancing at the beginning of the year and after Q2 made a significant difference to performance. Fortuitous feelings in your waters, we’ll do. My own commitment to property and value resulted in so so performance so far in 2020

  • 9 xxd09 October 6, 2020, 11:05 pm

    The Vanguard Global Bond Index Fund hedged to the pound (VIGBBD) continues to churn out between 3.5 % and 4.5% returns
    Admittedly some corporate bonds in there but portfolio volatility dampening and a significant % return does the business
    Will it continue to be the case going forward?
    Hope so as 65% of my portfolio
    xxd09

  • 10 Whettam October 6, 2020, 11:06 pm

    @Richard I’m in same situation, I must admit apologies I have not caught up with all the comments in weekend reading. I must admit (hush) I’m not totally passive, but really enjoy the series and my own portfolio has a passive core. In my defensive allocation, I own an active defensive investment trust with a healthy gold allocation, but am considering adding the asset directly. In the past I have made allocation changes rarely, but enacted them quickly. I like your idea of gradual change, but I’m hopefully only a few years away from retirement and already doing that with cash. Re Gold I have sort of made the decision not now, but probably in future, which means the price will probably continue to skyrocket.

    @Freemantle I know how you feel about property allocation.

  • 11 miner 2049er October 7, 2020, 9:27 am

    Is it a gamble when transferring provider, the amount of time your £££ may be out of the market what could happen to the fund prices? is the amount to be gained each year in fees worth it, how do we mitigate that risk?

  • 12 The Investor October 7, 2020, 12:51 pm
  • 13 Richard October 7, 2020, 4:08 pm

    @Whettam – nothing to apologise for :). The usual quote is ‘it’s time in the market, not timing the market’. I also think I have seen it said that statistically you are more likely to do better dropping a lump sum on day one than dripping it in over many years – though you need a strong stomach to accept a possible significant drop the next day. But these views are usually for the stock market and not something like gold or even say bonds. Also depends on time horizon – a few years from retirement is probably not what these statements are aimed towards either.

    Interestingly, I was also thinking this weekend about moving providers for cheaper costs. My ISA is with iWeb, I make very few transactions in my ISA theses days so it has been pretty much free for the last few years. My SIPP is looking a bit pricy though.

  • 14 David October 7, 2020, 7:19 pm

    @SPK: yes, I saw this recently: https://www.gmo.com/europe/research-library/2q-2020-gmo-quarterly-letter/ which rattled my confidence in bonds providing negative correlation with equity in this low interest rate environment (i have seen another article, not sure where, that stated that bonds should be even more negatively correlated with equities in a negative interest rate environment, however this article’s evidence seems to disprove that!)

  • 15 David October 7, 2020, 7:47 pm

    Having just taken early retirement (58) from the NHS, I decided to decrease my equity
    exposure from LS 60 to LS40 as I’m a safety first chap and really am only interested in beating inflation as I’m happy with my lot. I have 30% in this fund with 15 years funding in cash. Any thoughts on the remaining sum ? More in the LS 40? Or other ? Thanks for any thoughts. Bye the way been reading Moneyvator for last 6 years but am still a novice. But am very grateful for previous advice/insight.

  • 16 Matthew October 7, 2020, 8:49 pm

    My wife uses Lloyds because she likes the horse, my son uses vanguard because he likes the pirate ship. It’d be interesting to know how much branding influences customer base. Not much to be had for blackrock, ii, hsbc, natwest, Halifax etc, I suppose with l&g you get an umbrella at least

  • 17 The Accumulator October 8, 2020, 8:33 am

    @ Wheetam – yes, gold seems to do well when investors fear chaos and currency debasement. Then it subsides as doom fades. Buying it on the back of a pandemic seems like the very definition of buy high, sell low. If it was part of the strategy then I should have been drip-feeding into it for years as Richard says. It’s not part of the strategy though because while I think that gold is useful for managing sequence of returns risk I don’t think it has reasonable long-term growth prospects. So I wouldn’t and don’t buy it as part of an accumulation portfolio. I think there is an argument for buying it on the final glidepath as you approach deaccumulation. Say move into gold in the final five years of accumulation, hold 5% or so in the first decade of deaccumulation and use it up in a crisis when ‘it’s the only thing that works’.

    @ Jamers – I still need to write that post. It’s on the list, though been a long time coming. My apologies.

    @ Arabella – Interactive Investor looks good for a SIPP in drawdown, otherwise off the pace among flat-fee platforms.

    @ Spk – re: bonds:

    https://monevator.com/negative-yields-bonds/

    https://monevator.com/bond-prices/

    @ Matthew – that’s funny. And a difficult choice because horses and pirate ships are both ace. Still, we know branding works, I’m minded of all the male perfumes that come in hand-grenade shaped bottles.

    @ David – while it’s difficult / offside to give personal guidance, I’ve got a couple of thoughts that might help while you ponder. I wonder – given you’re taking early retirement from the NHS – if most of your expenses are taken care of by the NHS defined benefit pension? With 15 years spending money in cash, and bond yields on or below the floor, you could look at taking a bit more risk with some of your other holdings, but of course I’m mindful of your risk tolerance.

    If your holdings are large it may be worth diversifying away from Vanguard to some extent. There’s a lack of truly passive alternatives to LifeStrategy but you can roll your own with a two-fund portfolio: global equities and a bond fund – gilt or global bonds hedged to £.

    Some articles that you might find useful:

    https://monevator.com/how-to-estimate-your-risk-tolerance/

    https://monevator.com/passive-fund-of-funds-the-rivals/

    https://monevator.com/low-cost-index-trackers/

    https://monevator.com/investor-compensation-scheme/

    https://monevator.com/the-most-important-goal-for-every-retiree/
    In this scenario, a DB pension could take care of your floor, or a large chunk of it.

  • 18 Grumpy Tortoise October 8, 2020, 9:31 am

    I’ve been following this site for years and have found it an invaluable source of knowledge and an excellent good read at the week-end. Myself – I just have a VLS60 that I steadily add to each month. I may change it to an VLS40 when I reach 60. For my pension(s) I’ll will rely upon my many years contributions to the NHS Pension Schemes (1995 Section and the newer 2015 Scheme) when I retire in less than 8 years time.

    @Jamers / @The Acumulator – yes I too whould be interested to see the formulae in your quarterly SnS spreadsheet as I’d like to replicate it for my own situation.

  • 19 David October 8, 2020, 9:59 am

    @ Accumulator, thanks for your thoughts. I appreciate it.

  • 20 Grand85 October 8, 2020, 10:11 am

    I came to the same conclusion, that there wasn’t much point tinkering with my portfolio as it be guess work (btw will preference shares make a resurgence, i remember going through the archives and coming up on a piece written about these during times of turmoil).

    Ultimately I decided to shift some holdings to Vanguard and to switch my monthly deposit from LS60/40 into Vanguards ESG funds, as I’m sure things are bound to go tits up, I’m hoping those companies that focus on more than just the bottom line will re-rise leaner and stronger.

  • 21 Grand85 October 8, 2020, 10:15 am

    Also i’ve decided to try and create a side hustle – thus i’m dripping feeding cash into my own VC fund as a further measure of diversification and trying to get what little savings I have to grow

  • 22 Keith October 8, 2020, 10:18 am

    The Vanguard logo is not a pirate ship, but represents Nelson’s flagship in the Nile delta battle against France in 1798. The French of course might have viewed it as a pirate ship, but that’s not what Bogle had in mind! Hence of course also Admiral versions of Vanguard’s US funds.

  • 23 Al Cam October 8, 2020, 11:31 am

    @TA & @David:

    FWIW, my tuppence worth.
    A rather important consideration will probably be at what age @David decides/plans to draw his DB pension. That is, the presence and duration (or otherwise) of a Gap!

    P.S. love the use of “roll your own” – which incidentally is the exact same conclusion I came too. However, I am still very much on the fence re the hedging of bonds – which might just be a risk tolerance thing as well.

  • 24 David October 8, 2020, 12:25 pm

    Hi Al Cam, I did look into deferment and it takes 13 years to level out, by which time I’ll be 71. After 35 years on the emergency side of the NHS ( my conclusion is that old age is difficult and and consequently needs/wants less. ) and also in receipt of the S. P, I decided it was too long a timeframe although financially probably makes sense. @ Accumulator, do you mean 2 funds to replace the 40/60 L/S Fund or as an add on. Also yes I’m fortunate the floor is covered, no bells but nevertheless covered.

  • 25 Al Cam October 8, 2020, 12:54 pm

    @David:
    Thanks for the update.
    It is, of course, all very situational/personal – and, in some cases, there might ultimately be some taxation issues associated with a significant DB deferral.
    FWIW, I agree with your conclusion re needs/wants waning and this may happen even earlier than you suspect – but, again, we are all just a little bit unique wrt circumstances, objectives, etc.
    BTW, if your DB does cover you floor, then – possibly – the best way to look at your SP’s is as some form of indexed carpeting!
    Best of luck!

  • 26 Bal October 8, 2020, 3:36 pm

    Hi guys,

    Another interesting post and comments. I was about to get my first portfolio underway but just wondered if anyone has any insight regarding my possible choices. I don’t have a lump sum and can only drip feed in a couple of hundred a month. Looked at the low cost index trackers and keep indecisively circling around the same possible options.

    Looking to choose Vanguard UK gilts as the bonds bit as it appears to have a good past record and seems to be slightly above the global index equivalent other gilt index trackers appear to be similar in cost (wondered if I’ve missed anything). Is the extra cost for a global bond tracker worth it for diversification?

    Regarding an equity tracker I keep going around the same potential candidates:

    A. HSBC all world index tracker – seems a good total world option and my leading candidate. Seems to have a lower tracking error than vanguard’s global all cap and it’s cheaper (but with less holdings) but don’t see anyone saying any good things about it or many admitting they choose it. Wondered what’s wrong with it/ what have I missed?

    B. Fidelity index world P – good feedback from some websites ( also gets silver award from Morningstar), cheap and seems to track well against it’s dev world index but main concerns are it’s developed world tracker with only 1600ish holdings (possibly not diversified enough). No emerging markets (also reduces diversification) however could there be a case to not add them just yet as emerging markets tend to look more volatile? Could only balance an emerging markets tracker properly at a later date as the portfolio grows ( not enough each month to add more than a couple of funds at a time).

    C. L&G international index trust (ex UK) seems to track index well and fairly cheap but I’d not be able to add a UK tracker to balance correctly. My allocation for the UK part would be very small so maybe add UK at a later date when portfolio increases over time to rebalance properly?

    I also like xxd09’s choice of funds (with different allocation amounts) however can’t properly balance the UK tracker element as minimum fund amounts would raise it’s allocation far too high (also no emerging markets). Also restricted to non ETF trackers due to trading costs. Any thoughts would be gratefully welcomed.

  • 27 Bal October 8, 2020, 4:49 pm

    Sorry, in my last paragraph I meant to say in the early days of my portfolio I wouldn’t be able to set the correct allocations for separate trackers (around 4% – 5% for a UK / 8% – 9% for emerging markets) due to the minimum amounts per fund and the amount per month I could invest as I want to avoid having any biases without firm reasons. Emerging markets generally look more volatile therefore it may (or possibly not) be a good thing not to have them in the early days of the portfolio.

  • 28 The Accumulator October 8, 2020, 7:36 pm

    @ David – I meant as an add on. LifeStrategy is very good so I was talking about a two-fund ‘roll your own’ option in case you don’t want everything lumped in the same basket and don’t like the look of the other fund-of-fund alternatives.

    @ Keith – Great info! Was Bogle a naval history buff? Certainly the US active fund industry considered Bogle a scurvy sea dog.

    @ Bal – nothing wrong with HSBC. Their funds just don’t tend to attract as much attention. Emerging markets are more volatile but if you choose a global / all world tracker then you’d likely only have an allocation of 7% or so. It won’t make much difference to you unless you’re hyper sensitive to volatility which there’s no need to be when you have a long time horizon. Fidelity – again no problem with this fund, anecdotally Fidelity funds don’t seem to hug their indexes as tightly as say Vanguard. Obvs you’re more diversified with emerging markets as part of the mix.

    Ultimately you can get everything you need in one global equity tracker and a bond fund which should solve most of the issues with minimum amounts. If not then Vanguard LifeStrategy does it all in one (global equities and bonds) and automatically rebalances for you. No decisions required which can be a very good thing.

    Overall, I’d say it’s better to get going with a simple and low cost set up than worry too much about whether you’re holding 5-10% of emerging markets or not.

    @ Grumpy and IP – I’m glad you enjoy the site and appreciate you taking the time to comment. Thank you.

  • 29 David October 8, 2020, 8:33 pm

    @Accumulator, apologies re-reading I can see you meant as additions. Thanks for the list of possible extra funds.

  • 30 Grumpy Tortoise October 8, 2020, 9:19 pm

    @ Accumulator – great site and I must admit it has greatly changed my financial planning. Any chance you can share with us the SnS spreadsheet. I’m interested in how you calculate the asset class % annualised return (last column).

  • 31 c-strong October 9, 2020, 12:15 am

    @ Grumpy Tortoise
    No idea how TA does it but you can get an annualised return by using the XIRR function, which works in Excel, Google Sheets etc and is very easy to use.

  • 32 The Accumulator October 9, 2020, 7:49 am

    @ Grumpy – sure thing. The Investor has been on at me for ages to get around to it and I think the promptings on this thread have finally given me the kick up the jacksie I need.

  • 33 Grumpy Tortoise October 9, 2020, 8:45 am

    @ TA – fabulous. I’m sure myself and @Jamers are not the only ones who’d be interested. Thank-you.

  • 34 britinkiwi October 9, 2020, 8:58 pm

    @Keith – not sure if you are aware but Nelson’s flagship at the Battle of the Nile was HMS Vanguard…..hence very much a suitable symbol for Vanguard funds!

  • 35 Whettam October 10, 2020, 9:19 am

    @TA thank you that’s useful distinction, I agree not needed for portfolio still in accumulation. I think I have missed the boat to do anything re a final glide path, but you and @Richard have given me idea how I can use it in early years of drawdown to mitigate against sequence of return risk. The change in allocation will be OK then because I have approximately 10% in an old with profits policy which guarantees 4% pa, I regard this as part of my bond allocation (although it’s not actually a diversifier) but I could switch this into gold at retirement, therefore avoiding changing allocations too much, which I prefer to avoid.

  • 36 Bal October 10, 2020, 9:26 am

    @ Accumulator – thank you for your clarity of thought. I just needed to stop going around in circles over the same options.

    Noticed HSBC all world index has an ocf of 0.18 at Fidelity (would of been a no brainer if it was 0.13). Fidelity has a discount of 0.02 on its index world P (refunded quarterly – I think) bringing it to 0.1, if a few % in em markets wouldn’t make much difference Fidelity looks tempting (doesn’t make a big cost difference at the mo but thinking longer term) and maybe add em at a later date. Would of probably gone for Vanguard Life Strategy if there hadn’t been the regional bias.

    Thanks again for the help.

  • 37 Al Cam October 10, 2020, 10:06 am

    @Whettam:
    I may have misunderstood your comment above – in which case my apologies.
    However, from my reading of your comment, if I were you I would think long and hard before giving up any guaranteed income and especially 4% PA!

  • 38 Whettam October 10, 2020, 10:22 am

    @A1 Cam – Thank you for taking the time to message me, I wish it was guaranteed income! I worded it badly, the policy is an old ‘with profits’ policy, whilst its in accumulation it is guaranteed to grow at 4% p.a. (supposedly it can do better in good times, but never has!) but this is growth not income, I also loose the guarantee when I either reach the retirement date on the policy (65) or transfer it.

    So I currently regard this as part of my defensive allocation, its a bond which always pays 4% 🙂 but I am hoping to retire early, so when I retire I intend to transfer this into one of my SIPPs and use it for part of the tax free cash. From an allocation perspective, I’ll also probably add to gold in SIPP at this point and then reinvest tax free cash over a few years back into equities to hopefully further help mitigate SORR.

  • 39 Adrian October 10, 2020, 2:05 pm

    @Bal

    I think Fidelity’s website is wrong – HSBC’s factsheet and KID both say 0.13% for the HSBC FTSE All-World Index Fund Accumulation C.
    In any case even if it was 0.18% the choice between this and Fidelity Index World should be down to whether you want emerging markets or not – a 0.05% difference in charge is neither here nor there.

  • 40 Al Cam October 10, 2020, 4:45 pm

    @Whettam:
    Again, probably my misunderstanding, but why can you not keep this policy until you are 65 i.e. why must you transfer it earlier – e.g. is it held inside some company pension that you must surrender (or could, you perhaps put that into deferral) or similar?

  • 41 Whettam October 10, 2020, 10:47 pm

    @ Al Cam I’m 51 currently and hoping to retire approx. 55-57, I did briefly consider that and the only reason I rejected it, was I just thought it would make managing the drawdown easier e.g. all assets would be in drawdown, rather than having to drawdown a larger % and then have the with profits fund separate, for another 8-10 years.

    However maybe I should give the idea further consideration, because the guarantee is obviously pretty decent. Thank you for the idea, I’ll definitely consider it further.

  • 42 Bal October 11, 2020, 12:30 am

    @Adrian – Thanks for the feedback and I agree with your points. I’ve just downloaded the HSBC all world KID from both HL & Fidelity and they both say OCF at 0.13 in the KID but the fidelity website pages for key information & charges state the OCF at 0.18. Think I need to query this with Fidelity.

    Regarding cost, for my situation at the moment 0.05 would only be a very small difference but looking longer term this could have an effect later. Fidelity also offering a discount of 0.02 (reimbursement) for their fund makes a potential difference of 0.08 between the two but only if Fidelity can get away with charging OCF of 0.18 for HSBC. However the discount is of little incentive if Fidelity has just made a typo with HSBC on their website.

    Choosing whether to include emerging markets is certainly a bigger consideration I keep mentally wrestling with and wonder how much an effect this would have. I see adding em markets for diversification is important but I wonder about their effect and the difference having approximately 7% (5.23% China makes up most of em markets in HSBC all world) has on a small portfolio. If it would be negligible then could possibly stick with developed world (Fidelity) for the time being and may be add em markets on later as the portfolio grows.

    Also checked out the Vanguard Life Strategy 60 as a comparison and emerging markets looks to be only approximately 5% (if I’m reading it correctly). Also put off by the Life Strategy heavy UK bias of around 25%.

    I noticed tracking errors make a difference for both short & long term. HSBC KID tracking errors between 1 – 5 yrs vary from 3.0 to 3.45. Did see Fidelity’s tracking errors over same time periods but foolishly forgotten to note them down (need to properly check again later) but think they were going from memory around 2 – 2.25 (it’s also had the occasional historical wobble). I realise 5 years is not a great time span but best I could find at the moment.

    Did read somewhere (possibly Reddit so may be more opinion than fact) that the HSBC all world was synthetic not physically sampled. If true not sure if that makes much of a difference.

    So still on the fence a bit, either go for more diversification (HSBC) or consider past performance, cost and maybe add em markets at a later date. If HSBC has an OCF of 0.13 and Fidelity website have just made a typo it may edge it due to a greater diversification.

  • 43 Al Cam October 11, 2020, 1:40 am

    @Whettam:
    No problem. I would look further into it.
    There may be some issues around how you hold the fund. Other issues may well emerge as you research the subject further, but FWIW I reckon it is definitely worth some of your time.
    As usual DYOR, etc.

  • 44 Bal October 11, 2020, 12:24 pm

    Also just noticed ii also has HSBC all world OCF of 0.18 on the website but also has it at 0.13 on the KID. HL has the OCF at 0.19 which is higher than the others but the KID states 0.13. so rather confused now a few websites have the same inconsistencies from the KID & factsheet. Only AJ Bell matches the same OCF of 0.13 on the website with the HSBC KID. Fidelity index world P is a consistent OCF of 0.12 across all the same websites and the KID so not sure what’s happening regarding HSBC.

  • 45 Bal October 12, 2020, 2:41 pm

    Got a response from Fidelity stating their website OCF is correct at 0.18., the KIID is a generic document and it’s up to the discretion of the fund manager to negotiate different transaction costs & OCFs with each provider. This appears to make the data in the KIID (in this case regarding costs) irrelevant and potentially misleading.

  • 46 John Nicholas October 21, 2020, 8:10 am

    @the Accumulator. I have been a silent follower for many years and really appreciate everything you do.
    Recently I have been looking at the history of the slow and steady passive portfolio, how it has changed since it started in terms of asset allocation and actual holdings over the years – not just the steady reduction in equities – and I wondered if a post on your evolving thoughts over the years would be of interest to readers. For example, the UK has stayed a steady 5% as equities have reduced, but is still overweight its share of the global market. On the other hand, emerging markets have increase as a percentage of equities from 12.5% to over 15% – significantly higher than its share of global markets.
    I don’t have a problem with either but your thoughts would be interesting.

Leave a Comment