WAs my brain struggles to come back to terms with the belief that the yr is 2026, now looks like the right time to slide back under the covers of 2025. (Still warm from the glow of double-digit stock returns or the world on fire – I’m unsure which!)
Somehow it never looks like time to speculate. And yet the model portfolio earned 9.4% in 2025.
This is the third consecutive yr the portfolio has increased greater than 9%. Not bad for a 60/40 portfolio with a passive investment strategy.
Overall, our model portfolio achieved an annual return of seven.3% over a 15-year period from the start of 2011 to the tip of 2025:
This is a model portfolio for passive investing. It was founded in early 2011 with £3,000. Each quarter a further £1,360 is invested in a diversified range of index funds focused on stocks. You can read the origin story and find all previous passive portfolio contributions within the vaults. You can find the last quarter’s edition here.
The journey up to now
The last 15 years have proven to be a positive era for investments. The portfolio has suffered just one major setback – the bond crash of 2022:
Inflation is the UK CPI. Data from the ONS.
If you look closely at this chart, you’ll notice that the inflation-adjusted return line (light green) has not yet returned to the heights it reached in December 2021. The portfolio continues to be within the red in real terms.
Nominal returns are deceptive!
Many completely happy annual returns
The divergence between nominal and real returns becomes even clearer after we have a look at the annual results:
Inflation for 2025 is an estimate based on the November inflation rate CPI annual rate.
The yr 2022 was an actual bear marketplace for our model portfolio. The annual return in 2023 was also halved by inflation, and the return in 2025 was reduced by a 3rd.
Nominal returns could make you are feeling warm and fuzzy. But remember, it is the actual returns that ultimately pay your utility bills.
That’s the negative attitude anyway. Even more positive, the identical chart shows that out of 15 we saw only three bad years and just one otherwise subpar yr – the forgettable 2015.
Aside from these wet squibs, the S&S’s returns reflect a largely exceptional time for investors.
Annual returns of the asset class
Here’s how the portfolio’s sub-funds performed in 2025:
Any fund return that’s below the black CPI bar is negative after inflation.
For once, British stocks were the star of the show! In such a rare event as a Brit winning Wimbledon, the unloved FTSE All-Share made us domestic investors proud.
If you are apprehensive you are over-committed to the US big tech sector, then turning to the low-cost, value-oriented UK is one approach to solve the issue.
I ponder if the trading apps will now start pushing Greggs shares as a substitute of Nvidia?
(Yes, Greggs has been depressed these days. What can I say? I’m an enormous fan of sausage rolls.)
Asset class 15-year return
Over the lifetime of the Slow & Steady portfolio, any allocation away from global equities was punished with relative disappointment:
15-year return comparison for the present range of funds. Note that the actual portfolio only includes global real estate, small-cap stocks and index-linked bonds for ten years.
Diversifying outside of the S&P 500 (the foremost driver of world stock returns) has not (yet) paid off:
- Riskier emerging markets and small caps didn’t provide additional returns.
- Commercial real estate behaved like a weak stock fund.
- Government bonds lost money in real terms.
But the moral of the story just isn’t that diversification is dead:
With five years left of the portfolio’s 20-year mission, I do not feel compelled to take drastic motion now.
We rebalance yearly to be certain that the Slow & Steady doesn’t deviate too removed from its predetermined asset allocation.
Our stock/bond wedges are set at 60/40, so there isn’t a change.
Now all we’d like to do is shift our 40% bond asset allocation by 2% per yr until our defensive elements are 50% split between nominal treasuries and short-term index-linked bonds.
Which implies that this time:
- Vanguard UK Government Bond Index Fund cuts to 21% goal allocation
- The Royal London Short Duration Global Index Linked (GBP-hedged) fund increases to a goal allocation of 19%
That’s because we consider short-term index-linked bonds help protect a portfolio’s purchasing power when you’re able to spend it.
(For more on this consideration, see our No-Cat Food Decumulation Portfolio.)
Inflation adjustments
We increase our regular money contributions through RPI annually to take care of our inflation-adjusted contribution levels.
This yr’s RPI inflation figure is 3.8%, so in 2026 we can be investing £1,360 per quarter.
That’s a rise from £750 in 2011. We’ve increased the quantity we deposited by 81% during the last 15 years simply to maintain up with inflation.
New transactions
This quarter’s trades are as follows:
Emerging market stocks
iShares Emerging Markets Equity Index Fund D – OCF 0.2%
Fund ID: GB00B84DY642
Compensation sale: £587.19
Selling 237,785 units at £2.47
Target allocation: 8%
Global ownership
iShares Environment & Low Carbon Tilt Real Estate Index Fund – OCF 0.18%
Fund identifier: GB00B5BFJG71
New purchase: £483.11
Buy 204,172 units at £2.37
Target allocation: 5%
Stocks from developed countries (excluding the UK).
Vanguard FTSE Developed World ex-UK Equity Index Fund – OCF 0.14%
Fund identifier: GB00B59G4Q73
Compensation sale: £289.27
Sell ​​0.359 units at £805.10
Target allocation: 37%
British equity
Vanguard FTSE UK All-Share Index Trust – OCF 0.06%
Fund identifier: GB00B3X7QG63
Compensation sale: £590.02
Selling 1,721 units at £342.86
Target allocation: 5%
Global Small Cap Stocks
Vanguard Global Small-Cap Index Fund – OCF 0.29%
Fund identifier: IE00B3X1NT05
Purchased latest: £26.01
Buy 0.052 units at £502.48
Target allocation: 5%
Nominal gold coins (conventional government bonds)
Vanguard UK Government Bond Index – OCF 0.12%
Fund identifier: IE00B1S75374
Compensation sale: £746.85
Selling 5,466 units at £136.63
Target allocation: 21%
Global inflation-linked bonds
Royal London Short Duration Global Index-Linked Fund – OCF 0.27%
Fund ID: GB00BD050F05
New purchase: £3,333.50 (including reinvested dividends of £269.29)
Buy 3075,184 units at £1,084
Target allocation: 19%
New investment Contribution = £1,360
Trading costs = £0
Average Portfolio OCF = 0.17%
User manual
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Be calm,
