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Weekend reading: A rocky week, Monevator email is changing, and we’re up for an award

Weekend reading logo

What caught my eye this week.

Bit of a higgledy-piggledy digest this Saturday, which is right in keeping with a week in the markets that was all over the place.

If you sensibly follow The Accumulator’s advice to watch your paint drying and wash you’re hair a third time before you check out how your portfolio is doing again, you might not know things have gotten a little tasty.

As Merryn Somerset-Webb put it in the Financial Times:

Bonds are supposed to be boring. When they are not, you should pay attention.

That makes this week a good time to do just that. Bond yields are on the up: on Thursday the 10-year US Treasury yield hit 1.6 per cent.

That might not sound like much — and it is very low by historical standards — but it has tripled since the summer, with much of the action happening in the last few days.

It’s also not the direction we are used to bond yields moving in: for the past 40 years they have mostly gone down.

Inevitably share prices are readjusting as the prospect of negative (nominal) interest rates recedes – and as inflation twitches to life, just out of frame.

As yields on the theoretically safest asset in the world rise, more money will want some of that. You might scoff 1.6% won’t butter many panfried parsnips, but remember pension funds and others were buying safe bonds all the way down through zero.

At 2% or more, fixed income managers would be loosening their neckties and doing the graveyard dance from Michael Jackson’s Thriller.

Remember, too, that some high equity valuations have been predicated on very low interest rates persisting indefinitely.

As I wrote a few years ago:

Discounted cash flow models try to estimate the cash due from a company or property. They then compare this to the yield you could get from the lowest risk asset – a government bond.

Plug a historically low risk-free rate into such a model and you can get extreme valuations.

It’s possible to argue that everything from shares to housing is cheap.

That proved a good lens through which to see the future of equity returns over the subsequent years. Most shares – especially growth shares – rose from often already high valuations, unburdened by the gravity of interest rates.

Well, if yields rise a lot, it’s inevitable some of this will reverse.

Extreme growth share valuations will be harder to rationalize.

And income investors will move out of ‘bond proxy’ stocks and back into the real thing.

Market returns could be sluggish as a consequence. Some share prices will probably fall.

Pick your poison

We’ve long warned investors not to expect the unwinding of what they’ve decried as ‘a bond bubble’ to happen without any impact on share prices.

Super-safe government bonds yields are the gravity that permeate all valuations. It is all connected, in the long run.

But what to do about it now? Probably nothing if you’re a passive investor.

Merryn restates the case for shifting from a 60/40 portfolio on the grounds that bond prices could fall even as shares do. You’d possibly get no support from your bond cushion in a market decline, in other words. She suggests holding a bunch of other assets, including more cash.

Well, maybe. If you’re an active investor like me, knock yourself out. Even for passive investors, for years I’ve been suggesting you hold some of your bond allocation in cash as a response to low yields.

Cash – and the treatment of interest income – is a far more attractive to us little guys than to institutions.

But please don’t go crazy. If you own bonds in a well thought out asset allocation, you should probably keep most of them.

Check out the graph in the links below. It shows how a 70/30 portfolio has consistently matched or outpaced returns from the top 25% of – complicated and actively managed – US university endowment portfolios.

Those endowments are invested widely for various reasons (including career risk) but the result is the same.

Some of the best – and the majority of their lesser-performing brethren – could have just owned a couple of index funds, fired most of their staff, and seen better returns, at a lower cost.

What edge do you have that they don’t?

Markets don’t go up without going down. If you’re ten years from retirement, tweaks to de-risk may make sense. But really you should have been adjusting already, not just because yields are climbing off the floor.

Money is still super-cheap and abundant. The adjustments so far are small, and may yet – like the first signs of inflation – be mostly a head fake.

Or the regime of 40 years of declining bond yields may be changing. But please proceed in a calm and orderly fashion towards the exits.

Watch out for missing Monevator emails

Finally a couple of quick housekeeping notes.

The first is I’m going to sign us up to a proper email distribution service.

The one we use is free, creaking, and on deathwatch. Paid-for plans are surprisingly dear but should give us more flexibility in how we email you.

I’m just mentioning this in case you only read us via our email newsletter – rather than on the website, which some people don’t even know exists.

If our emails disappear, it won’t be because we’ve won big on the less-than-1% paying Premium Bonds, after all. (If I won the jackpot on the Premium Bonds, then Monevator’s future would be assured!)

No, it’ll be that something technical has SNAFU-d. You might want to check your spam folder, for example. If that’s empty, please get in touch.

Vastly more people get the email than read the site via RSS nowadays. But the several hundred RSS diehards should stay alert, too.

I hope to make the change soon. We don’t want to lose anyone!

Nominated under the influence

Finally, we’ve been nominated for a British Bank Award, run in conjunction with Smart People Money.

Monevator is in the running for Online Influencer of the Year – and it’s not even on account of @TA’s side-project of modelling onesies on Instagram.

You can read about all the nominations at the British Bank Awards website.

There were some new blogs on there to me. You might just find a gem.

When you’re done, you can vote for us if you’d like to, or for one of our worthy competitors. It’s a public vote, so I guess the most influential influencer will win.

Have a great weekend. Hopefully not long now before that won’t sound quite so tired, if like me you’ve been feeling the lockdown blues.

From Monevator

Decumulation: a real life plan – Monevator

If you only read us via email, check out the long comment thread, too.

From the archive-ator: Investment trusts now trading at a premium [From 2010, a reminder of how things fluctuate]Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Rishi Sunak expected to use budget to ‘start repairing’ the UK’s public finances – Guardian

Sunak also reportedly set to extend the stamp duty holiday to June… – Property Reporter

…and perhaps freeze the Lifetime Allowance for pensions – ThisIsMoney

London has more dollar millionaires than New York – Guardian

Britain sets out blueprint to keep Fintech ‘crown’ post-Brexit – Reuters

Call for SEC to regulate index providers as investment advisers [Search result]FT

Cryptocurrency exchange Coinbase to go public, last valued at $100bn – Bloomberg via MSN

Year after year, a simple portfolio matches the best complex ones – FWP

Products and services

How green is your pension? [Search result]FT

Disney+ hikes prices 33% in the UK, but it’s not the only one – ThisIsMoney

Yorkshire Building Society offers its savers a top rate of 3.5% – ThisIsMoney

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Popular blogger J. Money is now curating content – at The Motely Fool

Win a luxury fantasy Welsh cottage for just £5 [Maybe]Cwellyn Dream

Forget Bitcoin. Fintech is the real Covid 19 story, says JP Morgan – CNBC

Homes fit for a Masterchef, in pictures – Guardian

Comment and opinion

The relationship between money and happiness – Incognito Money Scribe

Levered work, balanced sheets – Krueger & Catalano

You don’t have to take the poor bet of trying to beat the market – TEBI

The [similar] risks of holding single bonds and bond funds – Humble Dollar

2020 retaught us the perils of over-confidence – Morningstar

Inheritance – Indeedably

“It’s been a while…”My Deliberate Life

What to do when the market is manic – Morningstar

Career advice for high fliers: find a champion – Banker on FIRE

When you go from a start-up to working at Google – Noam Bardin

Payment for order flow isn’t nefarious [Nerdy]Party at the Moontower

Collectibles, NFTs, greater fools: mini-special

The Bitcoin elite are spending millions on collectable memes/art – Wired

The psychology behind the boom in collectibles – AWOCS

Don’t know what an NFT is yet? Read this – The Business of Business

Speculative crypto art market takes off – Axios

Substack vertigo – The Reformed Broker

Format replacement cycles – Justin Paterno

Power to the person – Not Boring

Have fun staying poor [On Bitcoin bros]Of Dollars and Data

Naughty corner: Active antics

Rule Breaker Investing: listener stories [Podcast]The Motley Fool

The man who abandoned value – Institutional Investor

Individual stock ownership drives brand loyalty [Research]SSRN

Charlie Munger holds court at the Daily Journal AGM [Video] – via YouTube

Good luck with the elusive illiquidity factor – Advisor Perspectives

Covid corner

UK Vaccine rollout phase 2: who gets the jab next? [Video]BBC

“Do not wreck this now”: Van-Tam warns against breaking rules – Guardian

Why so many of us hit the ‘pandemic wall’ and what it means – Medium

FDA endorses J&J’s one-shot Covid vaccine – Stat News

The search for one vaccine to rule them all – Emily Mullin [hat tip A.R.]

How to know when the pandemic is over [US but relevant]The Atlantic

Kindle book bargains

Total Competition: Lessons in Strategy from F1 by Ross Brawn – £0.99 on Kindle

Black Edge: The Quest to Bring Down the Most Wanted Man on Wall Street by Sheelah Kolhatjar – £1.99 on Kindle

Quit Like A Millionaire by Kristy Shen and Bryce Leung – £0.99 on Kindle

The Six Conversations of a Brilliant Manager by Alan J. Sears – £0.99 on Kindle

Get a Kindle and save time, space, and a tree.

Environmental factors

An expert’s guide on making your clothes last forever – Guardian

Bill Gates: not just another billionaire with a plan – SL Advisors

The Green Homes Grant only met a tiny fraction of its target – Guardian

Bitcoin’s climate change impact may be smaller than thought – New Scientist

Off our beat

Aung San Suu Kyi tattoos flourish among Myanmar’s resistance – Guardian

Pranksters show horrors of robot dog by giving it a paintball gun – Daily Dot

The disabled influencers making their mark on social media – BBC

Gambling versus shares [Video, funny] – Foil Arms and Hog via YouTube

It’s okay to take a walk without headphones – Rad Reads

And finally…

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.”
Daniel Kahneman, Thinking, Fast and Slow

Like these links? Subscribe to get them every Friday! Like these links? Note this list includes affiliate links, such as from Amazon, Unbiased, and Freetrade. We may be  compensated if you pursue these offers – that will not affect the price you pay.

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{ 51 comments… add one }
  • 1 Gentleman's+Family+Finances February 27, 2021, 11:48 am

    Are you suggesting that the current unsustainable boom may not last forever?
    And that storm clouds are on the horizon?
    I’ve been feeling the same way for some time but have been consistently wrong.
    Bond yields as low as they are make the value of anything of value potentially infinite (Tesla anyone?) And we’re entering very challenging and changing times now.
    Grab your popcorn!

  • 2 Grff February 27, 2021, 1:29 pm

    To win you need to change your name. Not Woke enough.

  • 3 Mattis February 27, 2021, 2:18 pm

    @TI @TA A bit off topic, but what percentage of your savings go into your investment portfolio?

  • 4 Algernond February 27, 2021, 2:32 pm

    Freezing of the pension LTA for the remainder of this parliament….. Hope that high / hyper inflation holds off before I reach 55… Beginning to have serious reservations about saving hard into my pension for the last few years.
    I imagine it will be mild to compared to what is to come over the next few years to help pay for all these Covid / climate policies which are ‘for our benefit’.

  • 5 Ducknald Don February 27, 2021, 3:22 pm

    From the Guardian article: “Sunak also plans to incentivise lenders to provide mortgages to first-time buyers and current homeowners, with just 5% deposits to buy properties worth up to £600,000. The government will offer lenders the guarantee they require to provide mortgages covering the remaining 95%”

    So we can expect another dose of house price inflation. Bad luck millennials.

  • 6 Accidentally Retired February 27, 2021, 3:53 pm

    Great article. It’s my new favorite Saturday morning read!

  • 7 BerkshirePat February 27, 2021, 4:01 pm

    Well, I just voted for you ! I also regularly recommend this site to people on The Lemon Fool, to the extent that they probably think I’m getting paid.
    (Well, if you want to sort out some sort of referral fee I’m open to offers…. :-))

  • 8 Alan Battersea February 27, 2021, 4:15 pm

    Bizarre to see you promote one of these unregulated and skirting the edges of legality pseudo-lotteries.

    There have been many of these house lotteries over the years, and a spate of ‘win this car’ raffles over lockdown. They all are the same money-making operation; regardless of how many tickets are sold, they keep a percentage.

    In the case of the farmhouse link, they kindly keep 20% of each entry.

    Very odd link in the context of Monevator… I take it this is one of your friends or a relative? 😉

  • 9 tom_grlla February 27, 2021, 4:35 pm

    Congrats on the nomination. I know a lot of commenters say how great Monevator is, but I’m sure you don’t mind another one – you thoroughly deserve to win awards.

    That Worm Capital guy is quite something. All that ‘life optimisation’ stuff is a bit much for me…

  • 10 The Investor February 27, 2021, 5:40 pm

    @Alan — So? It’s a commercial operation. When I buy a pint of milk, Tesco keeps some money and so does the farmer. The poor cow gets nothing but fair enough. Indeed when you play the ‘real’ lottery the lottery keeps some of the money.

    The ‘win this car’ raffle is irrelevant. That is not this lottery.

    These guys have already done one successful lottery. I checked before hand.

    I’d love to win the house. Wish me luck! 🙂 They are welcome to their 20%. That’s business. It’s not the NHS.

  • 11 The Investor February 27, 2021, 5:42 pm

    @Berkshire Pat @tom_grlla — Thanks so much!

  • 12 Mathmo February 27, 2021, 6:33 pm


    Thanks for the links and good luck with the restacking of the site.

  • 13 David February 27, 2021, 7:18 pm

    As a committed passive investor I hadn’t even noticed the bond prices bombing. I check so infrequently. Thanks … I think 🙁

    This little hiccup coincides with a property sale and the arrival of a substantial chunk of cash to be squirreled away to ‘do something useful’. But with a sinking market the dilemma is now whether to buy the 2021/22 ISA in one lump, or to pound-cost-average on the assumption this reversal might continue for a bit.

    I think the usual advice (Tim Hale perhaps?) is that it’s better to invest in a lump sum about 2/3rd of the time. Is my recollection correct? Or are there alternative or newer views?

    Voted … 🙂 Good luck.

  • 14 Spinning_Top February 27, 2021, 9:26 pm

    Are short term bonds (2 yr maturity) exempt from this new threat? My understanding was the lesser the bond duration the lesser the risk you won’t get your money back. Consequently it is misleading to talk about “bonds” in general. Surely the losses potentially attached to a new rising yield dynamic will only be strongly felt on long term bonds with 10+ years maturity?

  • 15 The Investor February 27, 2021, 9:34 pm

    @David — One person’s sinking market is another person’s chance to buy in the 5/10/20% off sales and get more shares/dividends for their money. 🙂

    Maybe the same person, but just at different times in the market’s history.

    The difficulty with lump sum investing is you are more exposed to timing risk. Over the very long term it probably won’t make much difference, if you have that sort of time horizon. But in the near-term, it can be painful to be the person who made their big investment just ahead of a huge market slump.

    Statistically you are more likely to do better investing a lump sum as soon as you have it. That’s because most of the time markets go up. However they do also go down, and you don’t really know when that will happen.

    You might want to look to valuations (I probably would) but equally, good luck with that. It would have kept you out of most stock markets for the past 5-10 years (arguably the past two decades on some measures, such as price-to-book).

    Ultimately it’s a psychological problem more than a mathematical issue. The emotionally safest approach is to divide it up into say four smaller lump sums, and commit to investing one every three months / six months / year / whatever suits you.

    This method requires you to go through with it! If you invest at a high, then the market slumps, then you didn’t invest when it was down because you were too fearful, so you wait for it to recover, well, you might as well have invested the lot at the start. At least you’d have gotten some dividends.

    I’d assess how big the lump sum is relative to my wealth and my emotional tolerance and my standard investing strategy. Personally if the lump sum was a couple of years worth of normal contributions, say, I’d probably just lob it in right away. If it was ten years worth, on the other hand, I imagine I’d spread it out.

    But this is all really very arbitrary. The fact is anyone growing their way to life-changing wealth will eventually have a lot of money in risk assets, and thus at some point in the future will be equally exposed to a market decline. It’s almost just mental ‘bucketing’ to worry too much about this fresh capital.

    All just thoughts, not advice. I’ve used “you” above for convenience — I don’t know your circumstances and cannot possibly give personal advice, nor am I qualified to.

    Good luck! 🙂

  • 16 bb February 27, 2021, 9:50 pm

    I voted! Keep up the good work.

    I feel like I am wrestling with all of the topical issues at the moment.

    I sold some Bitcoin because I thought it prudent to take some profit ahead of potential CGT changes.

    I’m now stuck wondering how to invest the proceeds. Pension doesnt look great because I’m heading towards the LTA. Everything looks a bit pricey – I’m heading towards Premium Bonds as I cant think of anything better.

  • 17 Matthew February 28, 2021, 12:00 am

    Well done for the nomination, thank you for running the blog and giving us interesting stuff to read, interesting links, and a good community

    If yields are rising, who is selling? – I thought institutions were forced to buy… maybe more debt is simply being issued? maybe boomers are drawing down? maybe traders are shorting? if hedge funds are holding cash ut doesn’t sound encouraging

    Well the central banks would buy up some through QE and it wont cause inflation in the real world as long as there isnt fiscal spending after that. Austerity is the only painless way (for bondholders) of restraining inflation – interest rate hike? ouch, QE wind down? ouch, etc

  • 18 David February 28, 2021, 12:07 am

    @TheInvestor … many thanks. Having ‘lost’ a guilt-inducingly large part of a recently invested inheritance in 2008 (and recouped it all and some by riding it out) I reckon I have the emotional tolerance to cope. More significantly, it’s easier to do it in one lump, rather than remembering to juggle money through the banking system at the correct intervals.

    Like @bb I too am getting some Premium Bonds as it’s the only thing getting even close to 1% these days.

  • 19 The Investor February 28, 2021, 9:56 am

    @bb @David — RE: Premium bonds, yes, I don’t know if you saw last week’s article and followed the comments but I’ve recently loaded up on Premium Bonds, too. Nearly 1%! Ho hum. 🙂

    @Matthew — Well the Fed has been issuing lots of Treasuries to fund pandemic relief et cetera. There was also set to be a push to issue much longer-dated debt (Yellen was even talking about a 50-year bond) which could impact the yield curve, though I’m not sure where that got to. But anyway, prices are mostly set by marginal buyers. So institutions and whatnot who need to buy bonds to match liabilities would still be buying (and perhaps hoping the sell-off continues, so yields continue to rise) but marginal buyers may be cooling, moving to cash, rotating into value equities (e.g. US financials, etc, though that’s a far smaller space than US gov bonds) et cetera. Foreign appetite will change, too, especially as the US dollar had been weakening. Googling around will give some clues. 🙂

  • 20 Nearlyrich February 28, 2021, 10:47 am

    Vote for Monevator? Why? What did Monevator ever do for us? Ah well yes apart from the challenging comment obviously… and the best buy lists… and the portfolios… and the links… and the fantastic archive….and the aquaducts…what’ve they ever done for us?

  • 21 NewInvestor February 28, 2021, 11:12 am

    I’m surprised about at the “…the website, which some people don’t even know exists” remark. How did they sign up for the email in the first place?

    I’ve never bothered with the email – I bookmarked this site to my favourites toolbar in the web browser and just pop along randomly (sometimes a few times each day when the comments are coming thick-and-fast). I do have it on my RSS newsreader too but that’s a little pointless given my previous sentence.

    Keep up the excellent work!

  • 22 Aron February 28, 2021, 11:36 am

    I’ve voted.

    I hope we’re all invited to the celebration party.

  • 23 Naeclue February 28, 2021, 12:14 pm


    For once I agree with MSW. Only thing is she is over 6 months late! I reached the same conclusions over the risks of holding long duration government bonds about 11 months ago and sold the lot. FSCS protected cash deposits may not protect as well in stock market sell offs, but has far less downside risk.

  • 24 David February 28, 2021, 12:20 pm

    @TheInvestor … it was the article last week that made me look again at Premium Bonds.

    I realise my post should have said “It’s the only thing where there’s a hope of getting close to 1% these days”. Time will tell 😉

  • 25 SemiPassive February 28, 2021, 12:23 pm

    This week in particular has shown how cash and cash-like funds can prove their worth in your portfolio, when asset classes like equities/bonds/gold/commodities seem to have lost any negative correlation between each other and are all heading down together.
    In answer to Spinning_Top, yes, short dated bond funds are much more resistant to rising rates. Even just sub 5 year, let alone sub 2 year, will behave more like cash.
    The only gilts I hold are in a sub 5 year cash-like fund.
    I do like to be rewarded with some yield for taking risk, so I hold a couple of EM bond funds yielding 4.5% alongside the ultra low risk stuff and will likely add to them over the year as valuations seem to be relatively low compared to everything else.
    Maybe in another year or two US treasuries will be more tempting again (if 10 yr between 2-3%, 20+ year 3-4% and inflation doesn’t go too crazy) and justify a higher weighting if their real yield goes positive and crash protection ability increases. But if this all happens too fast we get another big taper tantrum and most things other than cash get whacked.

  • 26 Bal February 28, 2021, 12:55 pm

    Another great read and good luck for the award.

    As a tentative sideshoot from the thoughts of investment rock roads I wondered if you guys might like to investigate a future item by revisiting the Lazy portfolios but tilted towards all weather / risk parity portfolios.

    Look at can they all be adapted for the UK, if so do they still give a decent return today and how do they compare against a couple of control portfolios (i.e. two fund 60/40 tracker portfolio and an off the shelf read made Vanguard LifeStrategy 60).

    I realise some of this maybe an apples & oranges comparison but the aims would be:

    1. Can they all be built using a similar bank of passive fund choices on the same reasonable priced platform (small cap value funds?)?

    2. Do the UK versions of the portfolios work as well as the US versions?

    3. How do these compare and contrast (risk/reward/cost/etc.) against buying a 2 fund tracker portfolio or VLS60?

    4. Would they only require minimal rebalancing or do they need to be more hands on?

    5. Do some throw up any surprises?

    6. How few funds does it take to build a reasonable representation of each?

    7. Are they scalable ( can someone with a £10k lump sum get the same return/cost benefit from someone with £100k)?

    8. Have any not met their purpose anytime in the past / how long did it take them to recover (comparing against a 60/40 portfolio)?

    The portfolios that come to mind are Harry Browne’s permanent portfolio (previously shown in lazy portfolios), Ray Dalio’s all weather, Alex Shahidi’s RPAR, Golden butterfly, Larry Swedroe’s portfolio plus any others?

    I realise a number of these can be found on portfolio charts however I personally don’t have the smarts to convert and contrast them accurately enough for the UK. I also thought it might be an interesting item that others may also be curious about.

    I’m not looking to shoot anything down just very curious for educational purposes.

  • 27 ZXSpectrum48k February 28, 2021, 1:13 pm

    Sort of odd people are commenting on the underperformance of long-dated government bonds in the week they outperformed short-dated bonds by such a large margin.

    The yield curve has been undergoing a secular steepening since Mar-20. US 5s/30s had steepened almost 100bp. This was the week it flattened 20bp, the biggest one week flattening move since Mar-20.

    The move this week was not driven by supply-demand issues or even inflation, albeit it was exacerbated by a poor US Treasury auction and higher oil prices. It was all about monetary policy expectations. The market is starting to be worried that the Fed will allow the economy to run too hot for too long. That they will allow risk-free real yields to rise rapidly. That can be really bad for all risky asset classes and “zero yield” currencies like gold. So the market has started to price more more aggressive hikes for 2023/24. Hence 5y suffered far more than 30y.

  • 28 Al Cam February 28, 2021, 3:55 pm

    I suspect you may well find a lot of what you are looking for in this Mike Rawson post from Nov last year (or somewhere in the six earlier instalments):
    I seem to remember that MAXIMUS had a go at something similar last year too.

  • 29 Bal February 28, 2021, 4:16 pm

    @Al Cam – thank you for the link. I wasn’t aware of it or the MAXIMUS post. I’ll take a look, much appreciated 🙂

  • 30 Whettam February 28, 2021, 6:49 pm

    Just voted good luck guys.

    @Bal have you seen this:

  • 31 Spacebadger99 February 28, 2021, 7:23 pm

    Also just voted good luck.

    Another interesting comments section, still trying to digest the bond discussion, highlights gaps in my bond knowledge….off to find some source material to fill that gap…. Thanks all.

  • 32 Bal February 28, 2021, 9:24 pm

    @Whettam – thanks for the link. Yep, read it a number of times. I was looking more towards portfolios that looked towards risk parity / more bond heavy like Harry Browne’s permanent / Dalio all weather portfolios, etc.

    @Al Cam – The 7 circles link has answered a number of my questions and many of the portfolios I was wanting to compare were there. Thank you.

    Basically, only Tim Hale’s portfolio did better than the VLS portfolio series. To beat VLS the portfolios would need to be more complex than I would prefer.

    The only questions remain for me are:

    1. Could one of the 7 circles roll your own portfolios – no’s 11+ to 14 ( from Al Cam’s link) be created and balanced using VLS 60 (or global equity / global bond tracker combo) as the core and add the missing bits (small cap, property, gold) instead of creating from scratch (11 funds)?

    2.Would the Frankenstein portfolio creation be easy to keep rebalanced / maintained ?

    3. Would it be easily scalable and cost effective (lump-sum £10k or £100k)?

    It’s probably all folly but I’d be interesting to know if VLS 60 (or 60/40 global tracker combo) be improved by adding the missing components mentioned in basic 5% or 10% amounts (for ease in smaller portfolios) or using a combination of 2 multi asset funds to perform a similar function without causing unintentional consequences.

  • 33 Al Cam February 28, 2021, 9:59 pm

    Why not ask Mike R his opinion?
    He is usually very happy to chat/exchange ideas.

  • 34 Bal February 28, 2021, 11:06 pm

    @Al Cam – thanks for the prompt. Good to know Mike R is someone who’s happy to answer questions / exchange ideas, I’ll ask him. Thanks again 🙂

  • 35 Colin March 1, 2021, 12:58 am

    @Bal – the 7 circle analysis of the lifestrategy funds is a bit suspect. Rather than using the actual lifestrategy allocations,which has 25% UK, he uses :-

    UK = 6%
    EMs = 10%
    Developed = 84%
    Small cap = 10% of each market

    which accounts for his comment that it is low in UK stocks and high in developed stocks.

  • 36 Al Cam March 1, 2021, 1:43 am

    See part 3, including the comments.

  • 37 Jonathan B March 1, 2021, 10:46 am

    @Al Cam, I have been following the above exchanges with interest. I don’t know whether it is just me, but I find the 7-circle website impossible to navigate. I wondered about the question @Colin raised, but could find no hint of a link to the previous parts. And going to the page listed as “site map” gave an interesting overview of what the website was trying to do – but with no navigation links.

    I am sure you can tell me where I went wrong …

  • 38 Al Cam March 1, 2021, 11:45 am

    @Jonathan B:
    I know what you mean – and this is rather a shame as IMO that site is full of good stuff.
    Follow the link I posted.
    At the top right hand side of the page there is a search engine. Type in “Lazy Portfolios” without the quotes and this will bring you a set of pages to peruse.

    If you look even closer, this is, at least, Mikes second go at this topic – finding the previous work from memory is even more challenging – IIRC it is/was buried in a set of slide he presented at a meet up. Also, IIRC, there are some subtle changes/differences in the results between the two versions too.

    Also, at some point Mike tried to monetize the site. One upshot of which is that some stuff that was once freely available is now behind a pay wall – although in at least some cases – the comments remain visible.

  • 39 Luke Michael March 1, 2021, 1:38 pm

    Another great read and good luck for the award.

  • 40 Jonathan March 1, 2021, 1:49 pm

    Thanks @Al Cam, the page you get to with a search has other links too.

    But it doesn’t answer @Colin’s question (and mine) about the LifeStrategy alternative. His feature on the one-fund approach lists the make-up of VLS40 including 10% (so 25% of the equities) in a FTSE tracker.

    But then in a comparison table he lists the same fund as having just 2.2% in UK large company equities (or 3.2% in VLS60). And then in the page you linked he discounts the VLS solution on the basis of too low a UK weighting. By comparison his preferred self-build compromise portfolio has 16% UK equities, much the same as VLS60 which to my understanding has 15%.

    It slightly undermines his credibility. I don’t mind him preferring complicated solutions for his own money, but why use poor data to criticise those using a simpler approach?

  • 41 Al Cam March 1, 2021, 4:23 pm

    @Jonathan B:
    I did suggest “Bistromathics” might be at play in a comment to Part 3 where Mike talks about the way he chose to represent/model the Vanguard Lifestyle funds.
    And, as I suggested to @Bal, why not ask Mike?

    My own takeaway from the series was pretty simple: it takes a lot of effort to ‘better’ the Vanguard Lifestyle Funds and this includes a lot of the popular Lazy portfolio structures!

  • 42 SirRik March 1, 2021, 7:29 pm

    Voted! And now…good luck! Waiting for an invitation in case of win! 😉
    As usual…a big “Ciao!” from Venice to you all.

  • 43 Bal March 1, 2021, 8:54 pm

    @Al Cam – Yes, VLS was tough to beat was my takeaway from the 7 circles item but quite a bit of it went over my head but I think I got the gist of what was being said.

    It would be nice if you could bolt on a few extra bits (property, gold, small cap) to VLS to get a reasonable facsimile of the model portfolios shown. I raised my questions to Mike on the list a comment area at the bottom and will see what comes back as I couldn’t see where else I could do it.

    @Al Cam – thanks again for the link.

  • 44 NewInvestor March 1, 2021, 9:06 pm

    @Al Cam #38

    There’s a set of slides from a meetup (May 2019) in this page which may be the ‘previous work’ you referred to: https://the7circles.uk/lazy-portfolios/

  • 45 Al Cam March 2, 2021, 12:58 am

    @Bal (#43):
    And the answer you got makes an interesting read too

    @New Investor (#44):
    Thanks, that looks like it.

  • 46 Al Cam March 2, 2021, 11:39 am

    Re: my comment at #28 above:

    Here is a link to the other post I mentioned:

  • 47 Jonathan B March 2, 2021, 11:46 am

    Thanks @Al Cam and @Bal, you asked exactly the question I would have.

    If you felt that Mike R’s inclusion of small cap, property, commodities etc was crucial to get down volatility then you could create an “improved” LS60 by using threequarters LS80 with about 4 other funds to widen the sectors represented.

    But I am sceptical that anyone can model future volatility with enough precision to say that small allocation components are going to be crucial – though there are some in the financial sector who do pretty sophisticated maths. In practice I personally let Vanguard do the work for me (acknowledgement to Monevator for helping me with strategy), in fact I am just off to add my March allocation.

  • 48 SemiPassive March 2, 2021, 12:30 pm

    In reference to ZXSpectrum48k, short vs long dated outperformance comment.
    I was just comparing some iShares US Treasury ETFs on a YTD basis and in value their 3-7 Yr ETF has lost 1.34%, the 7-10 Yr lost 3.6% and the 20+ Yr has lost 10.5%. So that’s where I’m coming from.

    Jamie Dimon was on Bloomberg earlier saying he wouldn’t touch 10 yr treasuries. I was going to link to the article but found another one with him saying the same thing in August 2018. When they were yielding 3% (he said they were going to 5%). Just goes to show 🙂

  • 49 The Investor March 2, 2021, 12:59 pm

    @SemiPassive — Yes, last week was extreme in US bond markets, and the culmination of a YTD move. Nobody can doubt @ZX’s closeness to the market and insights, but his granularity on what’s important a particular time can sometimes be a bit off-scale for the likes of you and me. 🙂

  • 50 ZXSpectrum48k March 3, 2021, 1:43 pm

    @SemiPassive. The difference is you are thinking about bonds in cash terms. Professionals think about them in yield terms because nobody allocates to bonds in cash terms. What matters is duration-weighted allocation (cash allocation x duration).

    So over the past months, 30-year bonds have underperformed 5-year bonds in both price and yield terms. The yield curve has bear steepened. Last week, however, the yield curve bear flattened: 5-year went up more than 30-year. So it’s perfectly possible for 5-year to outperform 30-year in price terms while in yield terms 30-year outperforms 5-year.

  • 51 Bal March 4, 2021, 11:25 pm

    @Al Cam – yes Mike’s response was very interesting and gave me an answer I was looking for. Also thank you for the other link, much appreciated 🙂

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