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The Slow and Steady passive portfolio update: Q3 2021

The annualised return of the portfolio is 9.45%.

Fuel shortages, an energy crisis, the Winter of Discontent reboot…

There’s been so many callbacks to the 1970s lately I’m dusting off my flares.

By which I mean the absurdest trouser style in history – not my emergency distress fireworks.

Still, it’s hard not to FREAKOUT when the Slow & Steady portfolio got SLAUGHTERED 0.36% in the last quarter!

Sorry, I went a bit CNBC News there.

Anyway it’s okay, I’m coping with the loss. I took swift and decisive action.

I started a brawl in a petrol station.

Then I sold everything in exchange for a hard drive of crypto.

I feel much better now.

Steady on

Alright, you got me – I did nothing as usual. Except reflect on the 9.45% annualised the Slow & Steady portfolio has made for over a decade.

Things aren’t so bad, huh?

This quarter’s returns are brought to you by 5D-Anxiety-O-Vision:

Truth is, the portfolio’s pond is mostly still. The two biggest ripples emanated from:

  • The enduring volatility of Emerging Markets – down nearly 5% in a quarter. (Damn you, China!)
  • The slow puncture of conventional bonds. They’re the first asset class to become a net drag on the portfolio, having inflicted a -0.51% annualised loss across the portfolio’s 11-year lifetime.

This small loss from bonds is the price we’ve paid to insure against the worst fate in investing.

The Slow & Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £985 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and find all the previous passive portfolio posts tucked away in the Monevator vaults.

Signal vs noise

Do these disturbances mean anything? And surely we can’t put up with a loss-making asset like those rubbish bonds?

Judging when (if ever) such information should be acted upon is one of the main challenges of passive investing.

Does a signal show:

  • Something is fundamentally wrong?
  • The steering wheel needs a nudge?
  • Or that things should be left well alone?

The irony of the Smartphone Age is it deluges us with more information than we can cope with. While at the same time superficially offering us the power to immediately respond to every compelling tip, lead, and theory.

For any story in my investing feeds, I can dive down a rabbit-hole and discover:

  • Someone who’s woven a plausible-sounding thesis around it. (Plausible because I don’t have time to untangle the cat’s-cradle of connections enmeshing every story that mews for attention.)
  • Social proof that people are acting on the thesis. (Are they the cognoscenti or a cult?)
  • The product (or targeted ad campaign) that’ll ‘change my life’.

Why don’t I do something?

  • Am I stupid?
  • Uninformed?
  • Scared?
  • A dinosaur?

I hold the line, because I know I’m being hosed.

Separating signal from noise is impossible in this environment. It’s like fishing with my teeth in the Niagara Falls.

I only hear from the success stories du jour. Never how most of the stories end.

Yet these flashes-in-the-pan leave me with an after-image of someone else’s win. Even though most flame-out later.

There’s a mismatch between my life’s time-horizon and their 15 seconds of fame.

This dissonant loop locks my instincts and rationality in an eternal battle – like warring gods in heaven.

The proof points of a 24/7 culture can make long-term thinking appear flat-footed and flat-capped. (More dubious fashion advice there.)

The world has always been uncertain. But today’s excessive illusion of control further raises our anxiety levels.

It takes a lot of willpower to not scratch every itch.

Crypto insecurity

I do think that crypto is the most interesting challenge to evidence-based investing I’ve seen.

How do you respond when there’s no firm evidence?

Is it all tulips, or will crypto come up roses? Either is possible.

More likely, one or two cryptocurrencies will enter the pantheon of worthy asset classes. But I don’t know which of the current crop will make it, or whether they’ll all be supplanted by new competitors.

I’ve heard some say that they’re ‘indexing’ baskets of crypto because you should diversify across as many assets as possible.

But how many would bother to do that without having first heard all the crypto-millionaire stories? Huge wealth that was typically achieved by actually going ‘all-in’ on a particular digital asset, when it cost just peanuts?

Do they also advocate investing in asset classes where the gloss has long peeled off the marketing brochure? For example, commodities, private equity, and volatility?

I have exposure to esoteric assets insofar as the global stock markets tracked by my index funds include companies with fingers in these pies.

I take that as proof of financial value. And that’s how I’ll get my exposure to blockchain technology, too.

Cryptic conflicts

The most insidious insult in the knowledge economy is being labelled as someone who ‘doesn’t get it.’

If you don’t know what’s going on, then you’re deemed useless.

The obvious defense is to stretch ourselves ever more thinly. Put just enough skin in the new game and you can:

  • Participate in the upside
  • Limit the downside
  • Quell an unquiet ego

I think this exercise can help. In the last resort, I use it to enforce a ceasefire between my rational and instinctual sides. Because my ego is an arch-troublemaker. And its interventions usually solve problems as effectively as handbags on the forecourt.

Still, I won’t be including Bitcoin or any other crypto assets in this model portfolio anytime soon. Almost certainly “any time ever”, actually.

But if some of the companies our money is invested in via our index funds hit it big with blockchain, I’ll be happily cheering them along.

New transactions

Every quarter we throw £985 at the King Kong that is the global market. Our peanuts are split between seven funds, as per 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: £49.25

Buy 0.220 units @ £223.54

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: £364.45

Buy 0.711 units @ £512.42

Target allocation: 37%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.29%

Fund identifier: IE00B3X1NT05

New purchase: £49.25

Buy 0.122 units @ £402.14

Target allocation: 5%

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.18%

Fund identifier: GB00B84DY642

New purchase: £78.80

Buy 40.807 units @ £1.93

Target allocation: 8%

Global property

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

Fund identifier: GB00B5BFJG71

New purchase: £49.25

Buy 20.746 units @ £2.37

Target allocation: 5%

UK gilts

Vanguard UK Government Bond Index – OCF 0.12%

Fund identifier: IE00B1S75374

New purchase: £305.35

Buy 1.73 units @ £176.84

Target allocation: 31%

Global inflation-linked bonds

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

Fund identifier: GB00BD050F05

New purchase: £88.65

Buy 77.9 units @ £1.14

Target allocation: 9%

New investment = £985

Trading cost = £0

Platform fee = 0.35% per annum.

This model portfolio is notionally held with Fidelity. Take a look at our online broker table for cheaper platform options if you use a different mix of funds. Consider a flat-fee broker if your ISA portfolio is worth substantially more than £25,000. The Slow & Steady portfolio has long since passed that threshold. I’ll explore a move to a flat-fee platform in the next installment.

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.

Interested in tracking your own portfolio or using the Slow & Steady investment tracking spreadsheet? This piece on portfolio tracking shows you how.

Take it steady,

The Accumulator

{ 37 comments… add one }
  • 1 Matt October 6, 2021, 10:36 am

    Is it really outdated to invest in private equity?

    Currently you’re rocking my boat or I’m lettting you do it. Last week I read that value and momentum investing had underperformed for 10 years. I had just spent 2 months rigging my portfolio to consist of that investmrnt style, though not launching it. Now you’re coming after private equity which I’m also about to invest in.

  • 2 Chiny October 6, 2021, 10:42 am

    I must object to the denigration of flares, wonderful style at the time and cheap as well. My favourite were pale green with white stars, notorious after they publically split at the back one day. Thanks for reminding me of my younger days.

    Isn’t investing in crypto like investing in p2p – fine until we discover the problem. Hardly slow and steady.

  • 3 Mark Senior October 6, 2021, 10:50 am

    I’d be tempted to simplify the portfolio by selling the Emerging, developed world and UK equity funds and replacing them with a all world fund.
    Secondly, would switch out of UK treasury into a global bond fund which I personally wouldn’t hedge but can see that many would want to.

  • 4 Griff October 6, 2021, 11:13 am

    Article in the FT yesterday mentioning the 60 40 passive split may not be suitable anymore or something like that. The vanguard link embedded does go on to mention that it may struggle for the next 10 years.
    Should I be worried.


  • 5 The Investor October 6, 2021, 12:10 pm

    @Mark Senior — Sure, we’ve addressed this issue many times. 🙂

    In short, using an All-World fund is fine, and much discussed on Monevator (and in the final couple of paragraphs). The Slow & Steady is a model portfolio, designed to ‘show the sausage being made’ to demistify investing etc.

    Bonds are a conundrum. I sort of agree with you (if hedged) in that I think the UK faces very specific additional problems versus the rest of the developed world, which I don’t see being worked through for several years.

    On the other hand there’s an argument for keeping things simple and staying humble etc.

    (Personally as regular readers know I don’t at all invest like this, rightly or wrongly. So I’m answering the above with my passive mask on 😉 )

  • 6 xxd09 October 6, 2021, 12:32 pm

    You sound just like John Bogle of Vanguard!

  • 7 Moo October 6, 2021, 1:16 pm

    If value and momentum have underperformed for 10 years it may be a good time to invest that way (but it may be not). You should have enough conviction in a strategy to stick with it even if it underperforms for 10 years. If you don’t then you are better keeping to a global equity tracker.

  • 8 Andrew October 6, 2021, 1:27 pm

    My biggest concern isn’t the precise asset allocation split, whether or not to invest in bonds, or in private equity, etc… it’s the coming trivialization of what is traditionally considered ‘investing’ in the stock market.

    Wise (the app) just announced ‘Assets’ that lets people hold what is effectively their *current account* balance in a Blackrock world index fund, and have instant access to 97% of its present value via their debit card. So now we’re at the point where people will literally be walking around with the contents of their wallet in to the stock market.

    You can already do the same with crypto with a debit card.

    In my view, with a tsunami of liquidity in the markets looking for yield, we’re all going to have to re-evaluate what ‘investing’ really means over the next few decades.

  • 9 Factor October 6, 2021, 2:28 pm

    As a matter of interest, Vanguard are currently running advertising on Classic FM, and perhaps other stations. Not something that I’ve heard before and I’ve been a Classic listener since day one in the ’90s.

  • 10 Mr Optimistic October 6, 2021, 8:42 pm

    If you have the time and can be bothered, could you remind me why you hold the UK as a separate holding and didn’t just go for a developed world tracker ? The UK weight doesn’t look that far from a global capitalisation weighting.

  • 11 neil Scout truby October 6, 2021, 9:25 pm

    @The Investor

    >> Personally as regular readers know I don’t at all invest like this, rightly or wrongly. So I’m answering the above with my passive mask on ..

    How *do* you invest in Real Life then?

  • 12 MeanyBeany October 6, 2021, 9:59 pm

    @TA, sir, awesome work letting us all watch S&S.

    Methodological question for you:
    Do you use the fund unit prices on 1st October to calculate
    how many units of each fund to buy?
    Or, have you used the 30 September fund prices (which
    were available at 00:00 on 1 Oct) to calculate how much to
    spend on each fund and then wait until the 2nd to find out
    how many units Vanguard etc have given you?

    If the latter case, which would allow your new buys at the 1 Oct
    price, how would you handle rebalance sales&buys?

  • 13 David C October 6, 2021, 10:22 pm

    @Griff – Yeah, I’ve seen lots of those “60:40 is dead” articles lately. And they may be right. The trouble is nobody seems to have a really convincing better idea. At least, they don’t convince me. I take a bit of comfort from the notion (correct me if I’m wrong, somebody) that a big reason 60:40 isn’t working is that both sides have become correlated because both equities and defensives have been pumped up by quantitative easing etc. Which is a nice problem to have if you’re sitting on a good wodge already. Harder to know what to do if you’re just starting out though.

  • 14 mr_jetlag October 7, 2021, 9:28 am

    @Andrew “with a tsunami of liquidity in the markets looking for yield, we’re all going to have to re-evaluate what ‘investing’ really means over the next few decades”
    I believe that experiment has already been running since 2008, with central banks running in overdrive keeping the world economy afloat. While there’s general consensus that prices are inflated (and therefore yields depressed), no one can give a viable alternative.
    EM? Even more volatile.
    Private equity? Bunch of shysters in perpetual fear of a valuation (I work in the industry)
    Crypto? Er…
    So until a “correction” or some other clarifying event occurs, I’ll stick to TA’s mantra – DNFS. That Wise account feature actually looks like a great shout in terms of making your (current) capital work harder.

  • 15 Valiant October 7, 2021, 9:31 am


    What does DNFS mean, please?

  • 16 ermine October 7, 2021, 9:48 am

    > What does DNFS mean, please?

    Do not f*g sell 😉

  • Mogul
    17 The Accumulator October 7, 2021, 10:25 am

    @ Matt – see this piece on private equity:


    I’ve personally experienced the poor returns of value but I knew that a decade or two of underperformance was part of the deal when I signed up. Momentum’s historic outperformance relies on occasional big wins offsetting years of relatively weak returns. Moo is right – your strategy will unravel if you’re not prepared for years of looking like you’re wrong.

    @ Chiny – that’s hilarious. It’s only a shame I couldn’t complete the look with a moustache and chest wig in those days.

    @ Griff & David C – the expected returns for bonds over the next decade are negative. Equity valuations are also high – that signal has historically heralded poor returns over the next 10 years. Hence the warnings that the 60:40 portfolio is likely to be sub-par. The issue isn’t really about correlation. In a correction, bonds can still do their job.

    The problem is there aren’t good alternatives. Moreover, those predictions were being made a decade ago and didn’t come to pass. The situation looks more extreme now, but the lessons of ten years ago serve to remind us that predictions aren’t destiny. The models and signals are often wrong.

    One response to the poor bond outlook is to up your equity allocation. Which is fine as long as you don’t panic during a market crash. And that equities recover and don’t spend a decade or two underwater.

    There are no easy answers. The best advice is to predicate your asset allocation on your risk tolerance:

    Then run your calculations using a pessimistic / pragmatic expected return:

    If you’re accumulating, up your investment contributions to deal with the muted outlook for returns.

    If you’re decumulating – rein in your sustainable withdrawal rate.

    If actual returns are better than we all fear then you’ll bask in the upside. That’s what happened post 2008-09.

    Note, equities and conventional bonds got hammered when stagflation hit the world economy in the 70s. The answer to that is index-linked bonds and maybe a sprinkle of gold.

    @ Andrew – what could possibly go wrong? 😉

    @ Mr Optimistic – UK as separate fund is so we can see more of the underlying workings of a passive portfolio. In reality, I’d only hold the UK as a separate if I wanted to depart from global asset allocation as set by the market.

    @ Neil – TI invests like a maniac. A high-functioning maniac. Dig deeper into the site for more.

    @ Meany – each fund gets a set amount of the quarterly contribution. The units bought on any given date are a function of that. In this case, I used Oct 1 prices. Obviously fund prices are stale so you never know exactly what you’ll get ahead of time.

    Here’s a piece on rebalancing which might help:

    Bear in mind, the Slow & Steady portfolio is a demo.

  • 18 The Investor October 7, 2021, 10:34 am

    @TA — Great replies. So much sober wisdom in your comments. (To that end, @neil, suggest you don’t dig deeper into the site and steer well clear of my trading style. Think 600% turnover a year etc. You’ll never sleep again. https://monevator.com/days-of-being-wild-part-one/)

    @ermine @mr_jetlag @Valiant — @TA has a mantra of his own! An acronym of his own.

    I’m tempted to shut the site down. We’ve peaked. We can’t top this. 😉

  • 19 JimJim October 8, 2021, 6:34 am

    @TA, TI et al
    Great article as always, well received here. Benchmarking my portfolio against this for a while now reminds me that I should not benchmark 🙂 and just stick to the plan. Keep it simple.
    When you people sort out monetising this site and produce the merch, Put my name down for a DNFS cap and a copy of the book 🙂

  • 20 mr_jetlag October 8, 2021, 7:02 am

    @TI – I double checked the attribution, although the byline was yours so it’s fair to say it’s your acronym too!

    DNFS merch inbound?

  • 21 Haphazard October 9, 2021, 8:49 am

    Given the pessimism about both equities and bonds at the moment, and the fears of inflation, why is gold not performing better?

  • 22 The Accumulator October 9, 2021, 10:12 am

    Gold has zero correlation with equities and bonds. It tends to perform when there’s fear of currency debasement.

  • 23 Mark October 9, 2021, 12:34 pm

    That’s a great write up of a seriously sensible strategy, I’ve had it with new age stonks anyway although every portfolio should have a little pill of some variety. My new investment thesis came to me in a dream, a yellow horse with a rising sun. 🙂

  • 24 ADT October 9, 2021, 6:43 pm

    How can the UK Gilts be giving an annualised loss of 0.51% over the 11 years, but still have an overall fund gain since purchase of over £2k?

  • 25 MCS October 9, 2021, 7:13 pm

    I was just thinking the other day that I’d love someone I trust, such as monevator, to give an informed view of crypto. Nearly all the commentary is get rich quick focused, but I realise it is not an area of expertise on here so I need to keep looking.

    I’ve been trying to get an education in crypto and was surprised to find that it’s not just about speculation on bitcoin and other crypto assets or power intensive mining, most of the domain is about block chain projects and their associated coins which have genuine utility.

    Individuals are making money by holding and staking crypto to lend liquidity to exchanges and swap pools.

    People are running nodes on their home computers to create peer to peer wireless networks or monitor air quality and be rewarded for sharing their data .

    Players in poorer countries are earning a living playing play-to-earn block chain games, and those in richer countries are able to own that skin or magic sword they bought in game and sell it on a safe open market when they no longer need it.

    There are also ready made market tracking tokens, buying one can allow you to track the top 20 or 100 crypto currencies weighted by market cap with tiny fees.

    And on top of all this there’s block chain tax accounting software which follows all of your transactions on the chain and automatically records gains, losses and costs and calculates your tax liability.

    I’ve only been looking for 6 months and have put fun money into various projects as a way of encouraging me to learn more. I’m not in anything at the ground floor so I won’t be seeing any x100 gains but what I am seeing is promising.

    It’s not a safe place for your retirement money, but if you have a bit of spare cash to put in risky assets and an enquiring mind I think it’s well worth a look.

    I haven’t listed any projects by name because I wouldn’t want to be seen to be promoting any but a look at YouTube under those broad categories will give you no end of millennials pushing the stuff, don’t believe what they say but it’ll give you a good idea of where to start your research.

  • 26 The Investor October 9, 2021, 8:42 pm

    @MCS — I wrote about Bitcoin back in February, though it definitely won’t tell you anything you don’t know by the sounds of it: https://monevator.com/should-you-own-bitcoin-in-your-portfolio/

  • Mogul
    27 The Accumulator October 10, 2021, 12:01 pm

    @ ADT – that’s a good point. I rely on Morningstar’s Portfolio Manager to track the fund gain/loss numbers. I suspect there’s some discrepancy between how they account for fund inflows and outflows (i.e. contribs and rebalancing) and the XIRR calculation that provides the money-weighted annualised return number.

    The annualised return number is correct.

  • 28 The Investor October 10, 2021, 12:14 pm

    @TA @ADT — I don’t use the software so don’t know its terminology, but wouldn’t it just be the difference between the sequence of returns of our additions / rebalancing timing with the SSPP versus the ‘pure’ annualized returns to the bond asset class?

  • 29 ADT October 10, 2021, 5:46 pm

    @TA @TI ah ok, thanks.
    I had a look at your spreadsheet template. I think I trust the simplicity of the XIRR() function over Morningstar’s Portfolio Manager, so inclined to believe that’s the correct value.

  • 30 Al Cam October 11, 2021, 10:15 am

    @TA, @TI, @ADT
    Thanks to your S&S archive I can more or less re-create your overall IRR value from the pounds deposited – the delta (c. 0.1 percentage points PA) is possibly attributable to rounding of the contributions and/or the exact dates the contributions were made. As far as I am concerned, this is a true calculation of the returns achieved, ie what you have based on your actual contributions.
    What I found interesting though is the values given on your sheet for “total cash contributions to date (£)” and “portfolio gain/loss (%)” which I assume you get from Morningstar PM. By my calculations, the former is some £800 light and the latter is thus more than 3 percentage points (or c. 0.3 percentage points PA) too generous.
    I think this is down to the full costs incurred and the assumptions that are made about how to handle/present the true effect of costs to punters, ie returns are calculated after costs have been deducted.
    Any thoughts/comments?

  • 31 The Accumulator October 11, 2021, 1:08 pm

    @ Al Cam – Thank you so much for that. That’s definitely above and beyond.

    I think you’re right – looks like my cash contribs number has missed an update. I keep the Slow & Steady on my own spreadsheet, and in Morningstar, in the hope that’ll flag input discrepancies. My Morningstar cash contribs are about a grand higher than my spreadsheet’s.

    I’ll go back through the records to find where I missed updating the spreadsheet field.

    Morningstar’s fund gain/loss since purchase (£) number is:
    Total inflows minus total outflows
    Subtract from current market value

    Is it possible for the annualised return to be negative due to timing of contributions and rebalancing while on a non-time weighted measure the fund has outgrown the inflows?

    Hopefully someone more gifted than I can confirm or deny.

  • 32 Al Cam October 11, 2021, 4:02 pm

    No worries – I was intrigued and had the time/inclination to explore.
    It had not occurred to me that there may be missing values. There might be more than one missing entry/issue with your spreadsheet – as by my, admittedly rough, calcs your spreadsheet cash contributions are around £800 greater (rather than “about a grand” less) than the Morningstar value.
    If you struggle to reconcile I could always send you my spreadsheet for comparison.

  • 33 The Accumulator October 12, 2021, 9:57 am

    Total cash contributions were £52 off. The correct number is £39,665 plus change.

    The extra grand on Morningstar is the £985 of new contributions invested at the end of this article. I forgot that I hadn’t put that into my spreadsheet yet.

    My portfolio gain/loss figure is just a simple percentage increase on cash contribs vs current portfolio value – it’s neither time nor money weighted.

  • 34 Al Cam October 12, 2021, 4:34 pm

    I made the total cash contributions to be £40419 including the Q3 £985. This comes from a total of 43 contributions plus the opening 3k. I suspect you may have the opening payment plus 3 contributions in year 1 (2011); whereas I have opening payment plus 4 contributions. If I made this change then my total cash contributions would come to £39669 – which then just looks like a rounding issue to me. Sad or wot?

  • Mogul
    35 The Accumulator October 12, 2021, 10:03 pm

    Yes, opening payment plus 3 contributions in 2011 plus rounding issues – snap! 🙂

  • 36 Al Cam October 13, 2021, 1:11 am

    FYI, if I make that change, and assume each deposit is made on the first (calendar) day of each quarter and use the blog post date (6/10/21) for the valuation date, I now get an IRR (using the excel XIRR formula) of 9.44%.

  • 37 Al Cam October 13, 2021, 8:31 am

    OOI, making somewhat simplistic assumptions about the tax rates (accumulation vs de-accumulation) and ignoring all of the many other factors, if the S&S were held in a SIPP by my calcs the IRR to date would be around:
    15% higher / basic
    10% basic / basic
    12% higher / higher
    7% basic / higher

    The majority of the [ignored] other factors would in most cases IMO improve these IRR’s and in some cases could significantly increase them too.

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