The portfolio is up 9.93% on the year (to date).

Well now, it probably hasn’t escaped your notice that the markets have been dancing a merry jig since our last check-up in January. Clap your hands and say, “Yeah!”

Everywhere you turn it’s good news, if you like drawing ‘up’ arrows on your graphs:

  • Our US fund has leapt 20% since the start of the year.
  • The UK allocation swelled nearly 10% with Europe not far behind.
  • Even Japan climbed out of the red to put on 17%. Roll those printing presses.
  • The worst news we had to bear is that our Gilt fund could only manage a 0.25% gain over the last quarter. Not bad considering the hysteria about bond time bombs. Can’t hear any ticking… must be a good sign.

In raw numbers, our little portfolio is up over 17% on purchase, and we’re sitting on a £1,500 cash gain – considerably better than last quarter’s £600.

The portfolio tracker has got more complicated since we've sold several funds. The red annotations show you which funds we still hold.

The portfolio tracker has spawned complications now that we’ve swapped some funds. The funds inside the red boxes are the ones we still hold.

The Slow and Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000 and an extra £750 is invested every quarter into a diversified set of index funds, heavily tilted towards equities. You can read the origin story and catch up on all the previous passive portfolio posts here.

It’s impossible not to feel good about the gains even though we know that a rising market is making our next purchases more expensive.

Without doubt, sober-me prefers to buy shares when they’re cheap, but I’m also the kind of chimp who loves a bit of short-term success. I’m sure I’ve been warned about people like me in the behavioural economics books.

Luckily our passive plan is a straitjacket for the senses, or else we’d probably do something daft like sell our gilt funds.

Portfolio management

OK, fun time is over. Now we’ve got to re-enter the world of faffdom that is post-RDR brokers.

Last time, I sold up the majority of our retail funds because online broker TD Direct was touting cheaper clean class funds with nary a sniff of platform fees.

Well, it didn’t take long to discover I’d fallen for the cheap perfume of teaser marketing.

TD will be charging 0.35% platform fees on all funds from August. That means they’re knocked into a cocked hat by the best of our broker comparison table.

So what to do now?

I’ve decided to hold off on a wholesale bail from TD.

That’s because further upheaval is nigh. A decision is due shortly on the banning of commission for execution-only brokers.

  • If commission is reprieved then any Slow and Steady style portfolio worth under £46,000 would be best off going back to the way things were. That means investing in retail class index funds free from trading fees or platform fees, bought from a platform like Cavendish Online.
  • If commission is axed then everything is chucked up in the air again. Existing commission-troughing brokers will have until some point in 2014 to bedazzle us with new offerings.

Some industry insiders think we’ll enter a confusing twilight world where commission morphs into fund unit rebates rather than straight cash rebates.

Whatever, it seems unlikely that the best broker and portfolio selection I could make now will still be the best in a few months. Rather than continue to chop and change, we’ll assess the situation again at the next Slow and Steady update.

If you must invest straightaway then you can use the broker comparison table and these portfolio calculations to make a good decision now.

Even if your broker isn’t topping the best-buy tables, you’re better off waiting to see the lie of the land over the next six months than being a broker tart who gets whammy-ed with exit fees on multiple occasions.

All that said, I am going to sell out of the L&G Global Emerging Markets R fund in exchange for the L&G Global Emerging Markets I fund that’s now available with TD Direct.

It’s the same fund but a different share class that more than halves the Ongoing Charge Figure (OCF) from 1.06% to 0.52%.

As our funds are snugly tucked away in an ISA, there aren’t any capital gains tax issues to worry about, and even if there were, our gain is too tiny to trouble our CGT allowance anyway.

New transactions

Every quarter we lob an additional £750 into the maw of the market. Our cash is divided between the funds as per their target asset allocations.

We use Larry Swedroe’s 5/25 rule to trigger rebalancing moves, but all’s quiet this quarter.

UK equity

Vanguard FTSE U.K. Equity Index Fund – OCF 0.15% (Stamp duty 0.5%)
Fund identifier: GB00B59G4893

New purchase: £112.50
Buy 0.63 units @ 17751p

Target allocation: 15%

Developed World ex UK equities

Split between four funds covering North America, Europe, the developed Pacific and Japan1.

Target allocation (across the following four funds): 51%

North American equities

Vanguard U.S. Equity Index Fund – OCF 0.2%
Fund identifier: GB00B5B71Q71

New purchase: £187.50
Buy 0.91 units @ 20523p

Target allocation: 25%

European equities excluding UK

Vanguard FTSE Developed Europe ex-UK Equity Index fund – OCF 0.25%
Fund identifier: GB00B5B71H80

New purchase: £90
Buy 0.6 units @ 15074p

Target allocation: 12%

Japanese equities

HSBC Japan Index C – OCF 0.23%
Fund identifier: GB00B80QGN87

New purchase: £52.50
Buy 73.75 units @ 71.19p

Target allocation: 7%

Pacific equities excluding Japan

HSBC Pacific Index C – OCF 0.31%
Fund identifier: GB00B80QGT40

New purchase: £52.50
Buy 19.38 units @ 270.9p

Target allocation: 7%

OCF down from 0.36% to 0.31%

Emerging market equities

Legal & General Global Emerging Markets Index Fund R – OCF 1.06%
Fund identifier: GB00B4MBFN60

Sell: £1005.53

Replaced by

Legal & General Global Emerging Markets Index Fund I – OCF 0.52%
Fund identifier: GB00B4KBDL25

New purchase: £1080.53
Buy 2144.76 units @ 50.38p

Target allocation: 10%

OCF down from 1.06% to 0.52%

UK Gilts

HSBC UK Gilt Index C – OCF 0.17%
Fund identifier: GB00B80QG383

New purchase: £180
Buy 151.13 units @ 119.1p

Target allocation: 24%

OCF down from 0.18% to 0.17%

New investment = £750

Trading cost = £0

Platform fees = £0

Average portfolio OCF = 0.23% down from 0.29%

Finally – if all this seems too much like hard work then you can always buy a diversified portfolio using an all-in-one fund like Vanguard’s LifeStrategy series.

Take it steady,

The Accumulator

  1. You can simplify the portfolio by choosing the do-it-all Vanguard FTSE Developed World Ex-UK Equity index fund instead of the four separates.

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