Well now, we’ve had quite a run since the shock of Trump’s tariffs scattered our forces back in April.
Monevator’s Slow & Steady passive portfolio has rebounded almost 13% since the aftermath of Liberal With The Truth Liberation Day. I hope yours has done at least as well.
Overall, the portfolio has grown 6% so far in 2025. Which feels odd given the 24/7 bombardment of pessimism that’s churning up my online world. It’s getting to the point where I’m turning to real life for an escape.
Anyway, here are the latest numbers fresh from the manna-sphere:
The Slow & Steady is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £1,310 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 in the Monevator vaults. Last quarter’s instalment can be found here. Subtract about 3% from the portfolio’s annualised performance figure to estimate the real return after inflation.
Ignoring the third-quarter’s thrivers and divers for a moment, the thing that catches my eye is the portfolio has broken through six figures in total value. We’re clocking in at £100,713 on the table above.
That’s quite something for a portfolio launched in 2011 with £3,000. It’s been run passively ever since on an inflation-adjusted £250 per month in cash contributions.1
(Just to stress again, this is a model portfolio. The attached monetary values are entirely notional. But I used the same kind of passive investing strategy to grow my own wealth if you’re concerned about skin in the game.)
Growing modest savings into such a sum seemed unimaginable to a younger me. I had zero interest in the stock market and couldn’t stop splurging away everything I earned.
I thought investing was the preserve of the rich and highly informed financial experts. Ha!
Think again
But as millions of investors have already discovered – and our model portfolio is just the latest to demonstrate – it’s entirely possible to achieve good results by sticking to a passive plan:
The dark green line shows the portfolio’s return in nominal terms. The more important lower (lighter) inflation-adjusted line represents the Monevator model portfolio’s real annualised return of 4%.
We’re bang on the historical average for a 60/40 portfolio. Granted, that’s not spectacular – but this portfolio isn’t called Slow and Steady for nothing.
Of course, my inner critic is scornful. He casts brickbats like:
“You fool! What if you’d invested less in bonds?”
And:
“Why didn’t you foresee the AI revolution and invest 100% in Nvidia in 1999?”
But I look again at the chart above and I’m reminded of Charley Ellis’ brilliant description of investing as a loser’s game. By which he meant you win primarily by avoiding egregious mistakes.
In other words, you come through by playing the percentages and limiting your unforced errors. As opposed to trying to smash it with spectacular winners.
Ellis’ metaphorical inspiration was amateur tennis. If you’d seen me play tennis you’d understand why I’m happy with average.
New transactions
Every quarter we lob £1,310 over the investing net, hoping the rally keeps going. The cash is 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, so the trades play out as follows:
Emerging market equities
iShares Emerging Markets Equity Index Fund D – OCF 0.2%
Fund identifier: GB00B84DY642
New purchase: £104.80
Buy 44.19 units @ £2.37
Target allocation: 8%
Global property
iShares Environment & Low Carbon Tilt Real Estate Index Fund – OCF 0.17%
Fund identifier: GB00B5BFJG71
New purchase: £65.50
Buy 27.68 units @ £2.37
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: £484.70
Buy 0.625 units @ £775.82
Target allocation: 37%
UK equity
Vanguard FTSE UK All-Share Index Trust – OCF 0.06%
Fund identifier: GB00B3X7QG63
New purchase: £65.50
Buy 0.204 units @ £320.79
Target allocation: 5%
Global small cap equities
Vanguard Global Small-Cap Index Fund – OCF 0.29%
Fund identifier: IE00B3X1NT05
New purchase: £65.50
Buy 0.135 units @ £484.60
Target allocation: 5%
UK gilts
Vanguard UK Government Bond Index – OCF 0.12%
Fund identifier: IE00B1S75374
New purchase: £301.30
Buy 2.275 units @ £132.43
Target allocation: 23%
Royal London Short Duration Global Index-Linked Fund – OCF 0.27%
Fund identifier: GB00BD050F05
New purchase: £222.70
Buy 203.193 units @ £1.096
Target allocation: 17%
New investment contribution = £1,310
Trading cost = £0
Average portfolio OCF = 0.17%
User manual
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Take it steady,
The Accumulator
- Today’s £1310 quarterly investment is the inflation-adjusted equivalent of £750 per quarter in 2011. [↩]
@TA:
IIRC:
a) rate of return is the IRR or money weighted return (to account for the net contributions*);
b) contributions are escalated by RPI; and
c) nominal return is converted to a real return by CPI; were you to use RPI for this conversion it would be c. 1%PA lower
Is that essentially correct?
* ie any trading cost(s) would be deducted at source
Thanks for the article.
Surprised the IL bonds returned so much more than the government bond fund. I’ll look up to see if the vanguard fund is hedged…..knowing you I’d be surprised if it wasn’t mind.
Can you remind me why you went for funds rather than etf’s ?
Thank U @TA for another engaging write up of our old friend the S&S. 4 points leap out:
1. Isn’t it shocking how much inflation we’ve endured since 2011 (£750/quarter has become £1,310), given we were all told inflation was dead and buried in the 2010s? All those mid-last decade bylines about $(N) trillion of DM sovereign debt on negative yield.
2. I’m feeling reassured the 4% annual average real return since 2011 isn’t higher and is itself only average for the whole history of returns for the 60/40. The return of the last 14 years doesn’t suggest to me ‘bubble time’ for the 60/40, even if parts of the US market look rather overcooked on most valuation metrics (but even then not all, EPS measures registering less extreme).
3. If you could go back to the start of the S&S but only have had the same info back then as you did then (and not what you know now), would you then have done anything different? Personally, I just wish return stacking/capital efficiency had been a thing in the UK then – i.e. WGEC ETF is just a 90/60.
4. “Why didn’t you foresee the AI revolution and invest 100% in Nvidia in 1999”: I torture myself with this one every day, albeit, even if I had been blessed with some prophetic abilities (spoiler alert, I wasn’t), I’d have still only commited ~1%, not 100% (it’s up 5,000x since 1999, so ~1% can still be life-changing); and noone could have had any inkling of what Nvidia *might* become until at least CUDA came out in 2007 (since when NVDA is up ‘only’ a few hundred x) – and you’d still have had to have been a deep subject areas expert on both the semi sector generally, and also GPU architecture and software specifically.
Rather boringly (and sadly) for the many financially and technically savvy investors on this blog just choosing a global index equity and bond fund (2 funds only?) set up in your chosen asset allocation and then leaving well alone seems to be a winning investment strategy -so far!
xxd09
Impressive that Charles D. Ellis’s “Winning the Loser’s Game” is now in its eighth edition. I bought and read the third edition published in 1998. This was the start of my steady conversion to index investing.
Good to see the Slow and Steady portfolio just chugging along, despite all the political alarms and excursions. Pretty much mirrors what I see in my similar portfolio. I hope I can fend off the itch to ‘do something’ for long enough.
On the path not taken (NVIDIA or whatever), evidence of breakout performance is never visible in foresight, only in hindsight. Most of the complex arguments for why this or that sector or stock will do better than the rest are entertaining, but no way to predict the future. We just have to live with it.
Maybe not directly relevant to the S&S but VWRL may have cut costs by 3bp – https://www.trustnet.com/news/13459302/vanguard-cuts-fees-on-ftse-all-world-ucits-and-five-other-etfs. Every little helps
@Rhino
Here’s the Vanguard announcement w.e.f. 7 October:
https://www.vanguardinvestor.co.uk/investment-information/fund-changes
Perhaps it’s time to ditch the term passive investing. It seems to be so divisive, but it doesn’t really exist.
You’re using index based tools to make several deliberate (active?) decisions – global diversification, avoiding speculation, index linked vs non index linked, equities vs bonds, home bias or not…. the list goes on.
Maybe the “active” investors out there would catch up, if the terminology was changed.
@Eddie – I’d probably disagree with that. I think the term is really useful, and the intent is pretty widely understood now.
There’s a clear distinction between passive and active investing, and the words are antonyms so the usage is intuitive.
You’d have to re-educate the world if you were to choose a new term to mean the same thing..
@Mr Optimistic – Index funds over ETFs: paying ETF trading fees took a big bite out of small investor returns even up until a few years ago. Commission-free index funds were available, so were the better option for newbies. Now it doesn’t matter as zero-fee brokers are everywhere. Probably I should look at overhauling the S&S mix but have erred on the side of inertia so far 🙂 I think the last time I changed a fund was 2019.
@DeltaHedge – I did have you partly in mind when I was thinking about the very human tendency (which I think most of us share) to berate ourselves for lacking witch sight 🙂
Yes, I think the post-covid years have taught me everything I’d ever want to know about what inflation is capable of. Basic pleasures like going to the cinema or buying a takeaway make me yelp now because I anchor on bygone prices. Have you *seen* the cost of fish n chips?!
Pretty much everything I’d do differently now falls on the defensive side of the portfolio.
When I started, properly long-term returns weren’t available for commodities, so they looked like a liability.
The weakness of index-linked bond funds wasn’t widely understood or at least was poorly communicated. I don’t think anyone has ever put it better than ZX. To paraphrase, “They offer real interest rate exposure rather than inflation exposure.”
The story of gold was really poorly communicated. Hardly anyone bothered to distinguish between the pre and post free market eras.
Ultimately, the Boglehead defensive prescription was something like, just hold bonds and split that 50/50 between a nominal and a linker fund. I think that was inadequate and US-biased. Bonds look a lot better over the long-term if you’re American.
@Eddie – yes, I know what you mean. I think the term “passive investor” was useful for highlighting the difference between hands-off index investing and mainstream active fund management back in the day.
It matters much less now that the key tenets of index investing have been absorbed into the mainstream.
It is funny how much energy is expended on debating what it means to be passive. Essentially I think it means you don’t “market time” or “chase performance” – as much as is humanly possible anyway. Of course, there are many more investing decisions we must all make that depend on our personal circumstances and so cannot all be alike.
@Rhino and Curlew – Cheers for that! Vanguard finally responding to market pressure.
@Al Cam – Yes, that’s correct. For complete clarity, I track time-weighted and money-weighted return. So nominal MWRR in the table is 7.2%. Nominal TWRR in the chart is 7.3%. Chart was originally developed to compare against LifeStrategy hence TWRR.
@TA (#11)
‘The weakness of index-linked bond funds wasn’t widely understood or at least was poorly communicated. I don’t think anyone has ever put it better than ZX. To paraphrase, “They offer real interest rate exposure rather than inflation exposure.” ‘
I think with index linked bond funds there’s a crossover of risks with duration. For short durations, the risk is that implied inflation (i.e., the difference between nominal and real yields) does not match realised inflation and therefore there is volatility in real return, while with long durations, changes in yields dominate and there is volatility in both real and nominal returns.
I’m not sure where this crossover lies but it makes a case for holding a fund with an ‘intermediate’ duration.
Prior to 2022, IMV, the largest lack of communication with the standard ‘all stocks’ gilt funds (both nominal and inflation linked) was that issued maturities had lengthened with low yields, that low yields led to a greater duration for a given coupon and maturity, that low coupons led to a greater duration for a given yield and maturity – all of which meant that these bond funds had a relatively high duration. Finally, to cap it all, no-one expected low yields to unwind as quickly as they did.
@TA thanks.
@xxd09, out of curiosity, how did your strategy fare in 22/23 ?
@MO – I was wondering about this too, as xxd09 has a large component of global bonds hedged to GBP, I think its 65% VIGBBD.
I’m not sure if this is the right chart, but if it is then it seems to have fared relatively well, down only 4% or so post bond-apocalypse:
https://www.hl.co.uk/funds/fund-discounts,-prices–and–factsheets/search-results/v/vanguard-global-bond-index-income/charts
Compare that to VGOV which is down 40% or so – I wish my bond component had been more xxd09 like..
Never touched a thing-asset allocation remains at 35/65 (59% of the 65 % is Vanguard Global Bond Index Fund hedged to the Pound)
Withdrawals have continued at the normal rate
Portfolio value continues to rise rather too satisfactorily
Beginning to take the brakes off spending as now both of us 79 and Reeves to get as little as possible
Re 2022/23 of course was a big drop-15.5% from the current top to bottom values of portfolio
Portfolio now back to 4% off that rather frothy peak with as I say withdrawals ie spending continuing as normal
As a long term buy and hold Boglehead investor -been through GFC etc over my investing time 22/23 was just another expected “down” in the stockmarket
However it’s all very personal
I may have saved enough,live frugally and watch costs more than most
I however thank Mr Bogle every day!
xxd09
Was that asset allocation set at retirement? Maybe it pre dates retirement? Did you ever hold a large equity portion in the past? Could you remind me of retirement age? (Apologies realise that’s quite a barrage of questions). I am very interested in emulating aspects of your approach though hence all the badgering!
Holding a ladder of low coupon index linked gilts to maturity seems to give a free lunch (assume for these purposes zero hard and zero soft default risk).
If inflation ticks up I’m reasonably well protected against inflation (even post tax), whilst appreciating that ILGs are not a perfect inflation hedge.
If there’s deflation and interest rates drop, the medium and long term gilts should produce very nice (tax free) capital gains.
As there’s no such thing as a free lunch in finance I’d be grateful to understand why this thinking is flawed (as I suspect it must be).
Nearer 30/70 at retirement
Was 100% equities -global investment trusts-till some years from retirement so had accumulated a reasonable pot
Was a fan of John Bogles age in bonds as a rough guide
Always had 2+ years living expenses in cash
Obviously as an investor I don’t cope with volatility that well and wished to preserve my wealth at all costs-there is no way back once retired -100% success rate required
Retired at 57
It’s all very personal
xxd09
@JPGR – The main risk is default.
If you assume that away then you’ve just awarded yourself a free lunch!
We could also imagine a risk like a future authoritarian government fiddles the official inflation figures.
It’s plausible to imagine deflationary scenarios in which the value of gov bonds doesn’t rise because of a lack of credibility.
Aside from that I think most of the risk seems lies on the execution side. For example:
You don’t buy enough linkers to cover your actual expenses (personal circumstances change, tax system changes etc)
Your ladder expires (or is liquidated) before your death
@The Accumulator
Thank you for your very helpful comments. I’m relieved at least that they are virtually all points I have thought about and attempted to weight.
For what it’s worth I think the biggest risk for me, in the round, is a “soft” default by the government (e.g. fiddling the inflation numbers, changing the tax treatment of gilts).
But whow knows? As they say, “If you want to make God laugh, tell him your plans”.
Heh, yes. Love that quote.
@JPGR, @TA
another consideration might be that the gilt prices are set by the market
demand/supply conditions.
(with higher borrowing, much less QE, other western markets doing the same so less foreign demand, China getting a bit cut out etc, the yield had to move higher)
So if there’s more of that, the catch with buying a 20 year bond paying perhaps 5.33% or “2% real” for a linker, is just that next year those yields
would be even better and you locked in and you’re down on paper for
a year or three.
The linker doesn’t rescue you if this happens because the yield rise is not due to inflation.
I think if there is a lot of new QE done to counter this, it’s likely to be inflationary so the linker might be the better bet.
@Meany
Thank you. Makes sense. I know, already, that I haven’t invested in my gilts ladder at the optimal time (but I never really expected to).
@JPGR #20: soft default risk: on YouTube, Damien Talks Money, on ‘UK’s Sneaky Trick To Cut Debt’: TL:DR: HMT reducing debt burden by £90 bn from 2030 by changing how RPI calculated, to align with (conveniently) lower measure, CPIH.
@Delta Hedge
Great video, thanks. I invested in my ladder of gilts after the Government’s announcement of the change and having taken into account the proposed change in making my decision to invest. So, in my case at least, I don’t consider that particular change a soft default. But it certainly shows the Government’s readiness to monkey around with the terms of gilts already in issue.
Making redemption gains on index linked gilts subject to capital gains tax (or income tax) really would blow up the economics of my decision!
@xxd09, thanks for the follow up.
Nb A = Mr Optimistic
No idea how that happened…
@DH – I don’t think this can be considered a default and it doesn’t seem very sneaky. Sneaky would be fiddling the RPI figures and leaving linkers as they are. Publicly announcing the move 10 years ahead of time, and shifting to an inflation metric commonly used by other developed nations (no-one else uses RPI!) seems OK.
Admittedly, they may not have made this move if RPI consistently undershot CPI by 1%. But I’d guess linkers would be much less popular in that world. After all, the job is to hedge inflation. CPIH is an acceptable measure of inflation. RPI essentially a historical anachronism. As taxpayers, we should probably be glad not to pay over the odds to a bunch of bond holders?
“Every quarter we lob £1,310 over the investing net, hoping the rally keeps going.” – I know what you mean but would it be more appropriate to be a bit worry about this one instead hopeful? After all, portfolio is I. accumulation phase during rally, each chunk of the market bought costs more and more. Future expected returns are then smaller. I personally do not like the fact that my portfolio is growing while I accumulate. It is a great positive feeling when I look at the green numbers, then I invert my thinking because I know it’s a mind trick.
Hi Peter, are you referring to the opportunity to buy at bargain prices? Something along the lines of William Bernstein’s great line:
“A twenty-five year-old who is actively saving for retirement should get down on his knees and pray for a decades-long, brutal bear market so that he can accumulate stocks cheaply.”
I suppose it’s not growth that should worry us, but unsustainable growth i.e. growth that’s based on overoptimism rather than the fundamentals. We invest because the market has grown over the long-term. The green numbers are the reason we’re here. But I guess you feel the numbers have been too good to be true of late and we’re in for a reckoning?
@TA #27: yes, but once they’ve changed the goalposts the first time then it’s more likely that they’ll do so again (and again). TR73 is still a loooong way off maturity 😉
I understand your fears 🙂 I think they’re legit if we start electing populist governments that prefer to make up the official inflation figures. I guess they’d sell many fewer gilts though. Anyway, this change seems different in kind – in that it was credible and was recognised as such.
Interesting chat on so-called soft defaults, etc.
For info the change is from RPI to CPIH and not to CPI. FWIW, nobody else uses CPIH either. The CPIH is a uniquely UK index* that is based on CPI (more properly labelled European HICP**). Currently the CPIH comprises the scope of the CPI plus council tax and what is called owner occupiers’ housing costs (OOH). When the CPIH was introduce in 2013 it did not include council tax and it could deviate further from the CPI in future.
*that is totally under the control of the UK authorities; its calculation and structure are essentially controlled by ONS
**harmonised indices of consumer prices, see e.g. https://ec.europa.eu/eurostat/web/hicp which is defined by European legislation and controlled by Eurostat
As things stand today [by the weights] just over 80% of CPIH is identical to the CPI. However, the 20% difference can, at times, matter rather more than you may assume. Principally, this is because the OOH (at c. 17% of the CPIH) is the single most influential parameter (by some margin) in either index. In part, at least*, this explains why the CPIH caught up with RPI during 2024 and exceeded RPI for Q1 of 2025.
*the main reason was [private sector] rentals (PSR) which the OOH uses as a proxy; incidentally the PSR also appear (in a somewhat modified form) in the CPI, such that the (slightly indirect) total impact of PSR is about 24% in the CPIH and about 8% in the CPI. OOH is globally a tricky subject with quite the history.