The Slow and Steady passive portfolio update: Q1 2021 post image

A year ago, give or take, Covid-19 began to spread across the world like an ink stain. Twelve months of lockdown and one frightening stock market crash later and the Slow & Steady passive portfolio is up 21% in the last year.

Surely there’s been a mistake?

Although… if the end-of-the-world is not nigh then why is our model portfolio not up 2000% like those crazy non-fungible tokens and digitised fart certificates?

It’s because reality is simultaneously more dull yet at the same time unbelievable than any clickbait writer can get away with.

The extent to which our perceptions are built on shifting sands becomes clear when you compare the Slow and Steady’s annualised return numbers for 2021 with 2020.

Here’s this quarter’s numbers in spangly EmperorsNewClothes-o-vision:

The Slow & Steady portfolio is Monevator’s model passive investing portfolio. It was set up at the start of 2011 with £3,000. An extra £985 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 tucked away in the Monevator vaults.

Let’s compare this quarter’s mostly healthy annualised returns against the same figures twelve months ago, after the markets checked into A&E:

Asset class Annualised return Q1 2020 (%) Annualised return Q1 2021 (%)
Emerging Markets 3.72 11.48
Global Property 1.8 5.21
Dev World ex-UK 7.52 14.81
UK Equities 3.46 5.97
Global Small Cap 2.89 19.73
UK Government Bonds 6.38 -4.62
Global Index Linked Bonds 7.79 10.52

After enduring only one bad crash in a decade, most of the model portfolio’s assets in Q1 2020 were barely beating inflation. Time to get out the service revolver!

A year on though and I look like a genius. Quick, launch my newsletter!

Global Small Caps are returning near 20% annualised – even though people keep pronouncing small caps ‘dead’.

Developed World ex-UK is near 15% annualised. Don’t mind if I do.

(Let’s gloss over ‘in-UK’ for now. I’m sure this ‘Global Britain’ business will come good eventually.)

And yes, conventional UK government bonds have been beasted over the past four quarters.

But remember – the same bonds were our only solace a year ago.

Hopes and fears

It’s astounding how quickly the narrative changes after a lurch in the numbers.

An asset class turns briefly red and everybody’s retelling 1970s-inflation horror stories like Freddy Krueger is rising from the grave.

In the media, there’s a simple maxim that governs content strategy: Hopes and fears.

Just lace every piece published with human catnip along these lines:

1. Our dreams of making it big

For example:

  • Get rich with Abyssinian Crypto-SPAC trading cards.
  • Grate cheese with your abs in six months by only drinking beer.
  • Five techniques to get your favourite bag of bones into bed.

2. Our darkest fears and insecurities

For example:

  • They’re coming to get you.
  • They’ll take away everything you’ve ever achieved.
  • You’re missing out on this amazing new trend and everyone pities you for it.

The former tactic appeals to our love of lotteries. Much as we know it probably won’t work, we find it hard to resist gambling on a big payoff – especially when we’re young and haven’t got much to lose.

The latter line of attack taps into the insecurities of those who are satisfied with the status quo: “Now I’ve got it made, I just need to keep my eyes open for anything that’ll rob me of my hard-won status.”

The less likely the story, the more compelling it is:

“If this is BS then surely they couldn’t publish it?”


“Can someone please debunk this for me and then I can forget about it.”

Thus every mild perturbation in the market gets spun into the foreshocks of the next crisis by a media hungry for clicks.

Be prepared

It’s hard not to be knocked off course in this environment. But Kipling must have had passive investors in mind when he counselled:

“If you can keep your head when all about you are losing theirs…”

Remember that verse next time your grip on sanity is being loosened by internet hype.

We have more to fear from rampant speculation than we do rampant inflation.

New transactions

Every quarter we slingshot £985 at the global market Goliath. Our chips are split between 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 these are our trades:

UK equity

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

Fund identifier: GB00B3X7QG63

New purchase: £49.25

Buy 0.235 units @ £209.31

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: £364.45

Buy 0.781 units @ £466.58

Target allocation: 37%

Global small cap equities

Vanguard Global Small-Cap Index Fund – OCF 0.29%

Fund identifier: IE00B3X1NT05

New purchase: £49.25

Buy 0.129 units @ £380.42

Target allocation: 5%

Emerging market equities

iShares Emerging Markets Equity Index Fund D – OCF 0.19%

Fund identifier: GB00B84DY642

New purchase: £78.80

Buy 40.766 units @ £1.93

Target allocation: 8%

Global property

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

Fund identifier: GB00B5BFJG71

New purchase: £49.25

Buy 28.832 units @ £2.16

Target allocation: 5%

UK gilts

Vanguard UK Government Bond Index – OCF 0.12%

Fund identifier: IE00B1S75374

New purchase: £305.35

Buy 1.702 units @ £179.44

Target allocation: 31%

Global inflation-linked bonds

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

Fund identifier: GB00BD050F05

New purchase: £88.65

Buy 80.445 units @ £1.1

Target allocation: 9%

New investment = £985

Trading cost = £0

Platform fee = 0.35% per annum.

This model portfolio is notionally held with Fidelity. Take a look at our online broker table for cheaper platform options if you use a different mix of funds. 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.

Interested in tracking your own portfolio or using the Slow & Steady investment tracking spreadsheet? This piece on portfolio tracking shows you how.

Take it steady,

The Accumulator

The post The Slow and Steady passive portfolio update: Q1 2021 appeared first on Monevator.

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