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

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

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

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

The annualised return of the portfolio is 8.94%.

The Slow and Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £976 is invested every quarter into a diversified set of index funds, tilted towards equities. You can read the origin story and catch up on all the previous passive portfolio posts.

Age of uncertainty

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

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

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

There must be something you can do, Dr Accumulator?

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

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

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

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

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

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

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

Change management

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

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

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

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

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

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

New transactions

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

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

These are our trades:

UK equity

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

Fund identifier: GB00B3X7QG63

New purchase: £48.80

Buy 0.276 units @ £177.38

Target allocation: 5%

Developed world ex-UK equities

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

Fund identifier: GB00B59G4Q73

New purchase: £361.12

Buy 0.872 units @ £414.10

Target allocation: 37%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.29%

Fund identifier: IE00B3X1NT05

New purchase: £58.56

Buy 0.194 units @ £301.81

Target allocation: 6%

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.18%

Fund identifier: GB00B84DY642

New purchase: £87.84

Buy 50.922 units @ £1.73

Target allocation: 9%

Global property

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

Fund identifier: GB00B5BFJG71

New purchase: £48.80

Buy 25.272 units @ £1.93

Target allocation: 5%

UK gilts

Vanguard UK Government Bond Index – OCF 0.12%

Fund identifier: IE00B1S75374

New purchase: £302.56

Buy 1.594 units @ £189.86

Target allocation: 31%

Global inflation-linked bonds

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

Fund identifier: GB00BD050F05

New purchase: £68.32

Buy 62.62 units @ £1.09

Target allocation: 7%

New investment = £976

Trading cost = £0

Platform fee = 0.25% per annum.

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

Average portfolio OCF = 0.15%

If all this seems too much like hard work then you can buy a diversified portfolio using an all-in-one fund such as Vanguard’s LifeStrategy series.

Take it steady,

The Accumulator

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

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