Real life investment (under?) performance

I’ve now been interested in personal finance, investing and FIRE since late 2007.  That’s a long time and means I still follow a number of what are now old school largely US based but still largely relevant for me forums.  Within these forums I have and am still continually hearing about how ‘great’ ‘recent’ times have been for investment portfolios.  In my own little RIT world times have been good, after all I’m now FIRE, but I wouldn’t describe investment returns as feeling like they’ve been great.  

Given I’ve been capturing my investing data in detail since I started I thought it was worth updating some parts of my spreadsheet that had fallen into decline to try and understand what is really going on with hard data rather than feelings.

Let’s firstly look at what my investment portfolio has looked like over the years as I’ve learnt what works for me.  I know it includes plenty of investing mistakes but importantly it’s my real life.

Click to enlarge, RIT investment portfolio over the years

Diving in a little deeper this is what it looks like today:

• UK Equities largely contains FTSE100 and FTSE250 trackers
• AUS Equities largely contains a wide range of Australian Shares curated by an active manager within my Australian Superannuation. I suspect it’s largely a closet ASX200 tracker and if I could choose that’s what I’d have, a low investment cost ASX200 tracker, but it’s the best I can do and the fees are ok’ish.
• International Equities largely contains 1/3 FTSE Developed Europe ex UK, 1/3 US S&P500 and 1/3 FTSE Japan trackers.
• Emerging Market Equities largely contains FTSE Emerging Index trackers.
• Commodities is gold.
• Property is a mix of European and UK Property REIT’s including dogs like Hammerson.
• Bonds is largely UK Index Linked Gilts and Corporate Bonds ex Financials trackers.
• Cash is cash

It contains a mix of global investment classes but there’s no denying it contains a UK and Australia home bias. For completeness the investment products and investment wrappers are combined costing me 0.19% annually in fees.

Since late 2007 the portfolio after all fees and withheld taxes has returned an annualised 6.8%.  Looking at it a different way £10,000 has grown to £34,037.  Charted my real life portfolio performance looks like this:

Click to enlarge, RIT real life investment performance over the years

Now let’s add some benchmarks as eyeballing that and it all appears a bit at best ‘average’ and at worst ‘meh’ rather than ‘great’:

Click to enlarge, RIT real life investment performance vs benchmarks vs inflation over the years

The first thing that leaps out is how destructive inflation has been to a UK £ investor with the value of a UK Pound (using RPI as the measure of inflation) halving over the period of interest.  An investment return of 3.8% has been needed to just stand still. Thankfully, I’ve healthily beat that with a Real annualised return of 3.0%.

The investment benchmarks I’ve then used are 2-fold:

• My long run simple UK based benchmark which today contains 2/3 FTSE100 and 1/3 corporate bonds issued in GBP.  I’ve healthily beat this long running (for me) benchmark.  It’s even better than the chart shows because I know my performance also includes product wrapper fees (eg ISA, SIPP, etc) and withholding taxes (eg Australian Superannuation returns when in accumulation are taxed at 15%).  But in hindsight it’s hardly a hat-tip…
• The £ denominated Vanguard LifeStrategy® 60% Equity Fund.  Now, I’m beginning to be humbled.  Digging a little deeper what’s costing me all and more of the gap is the wrapper investment fees and taxes I’m carrying compared to the benchmark.  Just adding back in an estimate for the wrapper fees I’ve paid over the years and I’m better than this benchmark but not significantly so.  It’s a sobering demonstration of why I’ve always been trying to minimise fees and taxes. 

If I stand back and squint at all of this then it seems like I’m doing ‘ok’ but it’s all hardly ‘great’ so what are all these largely US based investors on about. Enter stage right the S&P 500:

Click to enlarge, RIT real life investment performance vs benchmarks including the S&P 500 vs inflation over the years

Now that is humbling but I think explains a lot…  The more concentrated a portfolio has been towards US Equities and particularly Big Tech / Big AI the more ‘great’ it’s been.  As for everything else it’s been somewhere between ‘meh’ and ‘average’.  How have your investment returns been?  Do you agree?

In terms of my own strategy this has prompted me into doing precisely nothing.  Time will of course tell whether that’s the right strategy…

As always DYOR.