Frozen Pension: The Slow and Steady passive portfolio update: Q2 2018

Our plucky Slow & Steady portfolio is well on the road to recovery after last quarter’s bloody nose. It’s sprung back 5.9% in three months, despite the first shots in a trade war zipping past our heads.

Once again reality defies the instinct to pounce on a pattern:

Last quarter’s biggest loser, Global Property, is the top performer this time. It’s up 13%!

The UK stock market enjoyed a nice 9.5% surge, despite the Brexit turmoil.

Like a golden UFO conveying cultists to paradise, the Bond Apocalypse has once again failed to materialise. Perhaps it’s timetabled by a British rail franchise?

Our Developed World and Global Small Cap holdings are still powering ahead as the notoriously overvalued US market defies gravity – or at least the gurus’ predictions.

Emerging markets are down nearly 3% this year despite being the asset class with the highest expected returns.

All of the above will change, of course, but about as predictably as a Trump press conference.

For now, here’s the blinding truth in Ultra-Dynamic-Dynamic-Dynamic Monstro-vision:

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 £935 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.

Our annualised return is a that’ll-do-nicely 10.2% over seven years. I wonder how many people realize how good that is?

At that rate your money doubles every seven years. Knock off 3% for inflation and you double every decade in real terms.

Recently a good friend of mine ‘fessed that he’d been warned off investing by an ‘informed’ acquaintance who claimed low interest rates had left the stock market dead in the water. The aftershock of the Credit Crunch, an endless stream of media misery, and a decade of stagnant wages led him to believe the global economy had been clothes-lined.

How many others have missed out on double digit gains due to zero interest rate fairy tales?

The reality is we’re doing pretty well, aided and abetted by diversification. Last quarter the Slow & Steady Portfolio was down 3.1%. The FTSE All-Share was down 6.9%. We were cushioned by other markets doing less badly and our bonds bearing up.

Now our rebound is neck and neck with the FTSE despite our 30% bond safety belt. Viva global capital markets!

Before I sign off with the new transactions, my apologies for the late update this quarter. My day job got a bit out of hand these last few weeks.

New transactions

Every quarter we lay £935 at the feet of the Almighty Markets and hope they smile upon us. Our cash is divided between our seven funds according to our pre-determined asset allocation.

We use Larry Swedroe’s 5/25 rule to trigger rebalancing moves, but all’s quiet this quarter. We’re just topping up with new money as follows:

UK equity

Vanguard FTSE UK All-Share Index Trust – OCF 0.08%

Fund identifier: GB00B3X7QG63

New purchase: £56.10

Buy 0.269 units @ £208.67

Target allocation: 6%

Developed world ex-UK equities

Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.15%

Fund identifier: GB00B59G4Q73

New purchase: £336.60

Buy 0.972 units @ £346.27

Target allocation: 36%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.38%

Fund identifier: IE00B3X1NT05

New purchase: £65.45

Buy 0.218 units @ £300.41

Target allocation: 7%

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.24%

Fund identifier: GB00B84DY642

New purchase: £93.50

Buy 59.29 units @ £1.58

Target allocation: 10%

Global property

iShares Global Property Securities Equity Index Fund D – OCF 0.21%

Fund identifier: GB00B5BFJG71

New purchase: £65.45

Buy 31.9 units @ £2.05

Target allocation: 7%

UK gilts

Vanguard UK Government Bond Index – OCF 0.15%

Fund identifier: IE00B1S75374

New purchase: £261.80

Buy 1.599 units @ £163.74

Target allocation: 28%

UK index-linked gilts

Vanguard UK Inflation-Linked Gilt Index Fund – OCF 0.15%

Fund identifier: GB00B45Q9038

New purchase: £56.10

Buy 0.298 units @ £188.32

Target allocation: 6%

New investment = £935

Trading cost = £0

Platform fee = 0.25% per annum.

This model portfolio is notionally held with Charles Stanley Direct. You can use that company’s monthly investment option to invest from £50 per fund. Just cancel the option after you’ve traded if you don’t want to make the same investment next month.

Take a look at our online broker table or tool for other good platform options. Look at flat fee brokers if your ISA portfolio is worth substantially more than £25,000. The Slow & Steady portfolio is now worth over £41,000 but the fee saving isn’t juicy enough for us to push the button on the move yet.

Average portfolio OCF = 0.17%

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