Holly's Blog: The Boring Money Fund - the wisdom (or the folly?) of our crowd

By Mike Narouei, Content Producer at Boring Money

8 Jan, 2021

It's the first blog of 2021! In the run-up to Christmas we asked you guys which markets you liked for 2021. About 350 of you gave us a detailed breakdown of which regions and sectors you liked. We added all this together and have created the Boring Money Fund 2021.

Hello everyone in this first blog of 2021. And what a marvellously Happy New Year we are all having! If any of you are still managing Dry January I bow with respect at your superior human altar.

One of the only silver linings in this continued cloud of poo has been the Duke of Hastings, starring in Netflix’s Bridgerton. My first tip of the year is that anyone who has ever found a man more then passably appealing to the eye should watch. Yes, Brad is firmly dumped and the Duke of Hastings is on my dance card. I would go seriously astray for this young man ha ha ha #banishtheblues #Mummysbusy

Pull yourself together woman – this is about money!

Sorry. In the run-up to Christmas we asked you guys which markets you liked for 2021. About 350 of you gave us a detailed breakdown of which regions and sectors you liked. We added all this together and have created the Boring Money Fund 2021.

On 31st December, I opened up a general investment account on AJ Bell Youinvest for the Boring Money fund, and allocated £2,000 in total to this ‘fund’, buying investments which gave me proportionate access to the regions and sectors as nominated by you. Our fund is like a Russian Doll – inside it there are 15 funds or ‘ETFs’, from regions including the US, Asia and Europe, with some thematic additions such as a Global Clean Energy fund too. You can see a full list of the detailed components here (https://www.boringmoney.co.uk/learn/articles/boring-money-fund/).

  • You were most positive about the US, China and Emerging Markets

  • You were down on gold and property so we excluded these

  • You wanted 41% of your investments to be allocated to sustainable variants where available

  • You wanted us to add some thematic spice in the form of a Global Clean Energy fund, a biotech fund and a healthcare fund

Multi-Asset Funds

What we have done is effectively to create what the industry calls a ‘Multi-Asset’ fund. You have collectively acted as our Investment Committee. And worked out how to allocate a lump of capital amongst various regions and sectors.

Multi-asset funds can be a hugely sensible way to invest if you don’t want the hassle of ongoing monitoring and responding to global markets - which are increasingly confusing and seemingly divorced from what we see around us. BlackRock’s MyMap and Vanguard’s LifeStrategy ranges are 2 examples of mainstream options for these funds.

The Russian Dolls

Inside our fund are ETFs (https://www.boringmoney.co.uk/learn/investing-guides/product-guides/etfs/) and funds. ETFs (Exchange Traded Funds) are a bit like playlists – they are collections of any region or sector’s biggest shares, collectively grouped for convenience in a single investment pot which you can in turn buy or sell like a share.

They don’t pay Horatio The Fund Manager With Expensive Tastes to cherry pick and are largely automated, which means the fees are typically very low. ETFS are a great way for investors to build up a cheap globally-diversified portfolio. For example we accessed the FTSE100 using the iShares FTSE 100 ETF which costs investors just 0.07% a year.

On a practical note, where possible we used funds rather than ETFs because we wanted to keep transaction costs low. We opened our account on AJ Bell Youinvest and it costs £9.95 to buy an ETF and £1.50 to buy a fund. With just a £2,000 account we opted for funds where available. But for those of you with larger sums, a key benefit of using ETFs not funds is that the larger platforms cap their fees on shares and ETFs – so AJ Bell charge a maximum admin fee of £42 a year on ETFs held in an ISA. Hargreaves Lansdown cap fees on ETFs at £45 a year. For buy and hold people, ETFS are a great way to keep costs low.

We have used BlackRock’s iShares, Fidelity, HSBC, Invesco, LGIM and Vanguard to create our fund. These component parts were chosen in a very satisfactory and swift Investment Committee meeting on 31st December which I chaired and which was attended by me. I made some marvellous suggestions and everyone agreed with me.

Sustainable

As a final point, you wanted 41% of all investments to be allocated to a sustainable option where available. We tried. In the end circa 31% of our fund is in sustainable options. Some markets do not yet have great sustainable options. A few did – but AJ Bell told me I needed to phone them and pass a sophisticated investor test 🤮 to buy some of the more esoteric stuff online. And I would rather listen to Boris give another press briefing than that!

Some of our sustainable options include the Invesco S&P 500 ESG Index fund and the iShares MSCI World ESG Screened UCITS ETF USD (Acc). Don’t shoot the messenger about the name – it just means a huge collection of non-dodgy big global shares in a mainstream regulated structure where any dividends are automatically reinvested. Phew.

A final note

Imagine my dizzying excitement last night to calculate that one week on, our fund is now worth a princely £2,073 and 23 pence. But I should be clear on a few things.

  • First I have excluded transaction fees from the picture. We bought about 10 x ETFS and 5 x funds in total, using AJ Bell Youinvest as our platform. So I had to fork out about £110 to Mr Bell in the process. This is a timely reminder that transaction fees can eat into smaller balances particularly – and a single multi-asset fund is a cheap and sensible way to get a diversified low-cost smaller portfolio. With superior investment governance to ours!

  • Let’s also touch on risk. Our fund is ‘quite hardcore’. It’s at the Vindaloo end of spicy. Neither does it follow a benchmark. This is what fund managers describe as ‘unconstrained’ and a ‘high conviction’ fund! We have made bold decisions and simply left out some markets which we didn’t like.

  • And finally I remind you of timeframes. It takes about 5 years to truly identify skill over luck. And the £73.23 returns on £2,000 in our first week (3.7% returns) do not make us a genius. Indeed the FTSE100 has done better than this alone.

But with all these things in mind, I hope this test is of use. I hope it brings some colour to what a multi-asset fund is. I hope it explains the role ETFs can play. I hope it shows you some decent component building blocks for portfolios. I hope it highlights the growing availability of sustainable options. And hell – when I’ve rewatched Bridgerton 53 times, I need to find some other way to entertain myself over these long cold months!

I look forward to hearing what you think about our fund! - leave your comments online! (https://www.boringmoney.co.uk/learn/articles/boring-money-fund/)

Holly

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