The background to my £50,000 portfolio challenge
Back in March 2015 I decided to invest £50,000 of my own money using 80-20 Investor. The purpose was two-fold, firstly to show how you can use 80-20 Investor to invest and outperform the market with only a few minutes effort every now and then. Secondly, no other investment commentator, journalist or research provider invests their own money for fear of failing. This is a sorry state of affairs and is precisely why I committed to openly running my own portfolio for 80-20 Investor members to see.
Since then I have periodically changed my portfolio using the fund suggestions provided by the 80-20 Investor algorithm and associated research. I always disclose the changes at the time they are made.
Performance review
When the UK voted to leave the European Union markets went into meltdown. I mentioned in my article Brexit market crash – Run for the hills or fill your boots? that on Friday:
- Italian stocks suffered their worst ever day with an 11% fall
- the FTSE 100 tumbled more than 8% within the first few minutes of trading, its biggest fall since the collapse of the US investment bank Lehman Brothers in 2008
- Pound suffered its biggest one day fall ever (down over 8%)
- Wall Street ‘fear gauge’ surged 40%
- Bank shares fell by 30%
By Monday the situation worsened with the pound hitting a 30 year low and equity markets globally continued to tumble. By the close of business on Monday in just two days the Brexit vote had wiped $2 trillion from global equity markets!
Yet by early Saturday morning I had already started receiving emails of amazement from 80-20 Investor members telling me how much money they had made as markets sold off. One member even made £20,000 on Friday alone thanks to 80-20 Investor.
It therefore comes as no surprise then that my £50,000 portfolio made 5.35% in just two days since the referendum!
The table below puts this into perspective:
| Portfolio/fund | % return in 2 days after Brexit vote |
| Damien's £50,000 portfolio | 5.35 |
| Passive Vanguard benchmark | 2.25 |
| Average managed fund manager | 0.29 |
| Neil Woodford | -3.97 |
| FTSE 100 | -5.62 |
The level of outperformance of my £50,000 is incredible. So much so that the Wall Street Journal interviewed me about it.
The table below shows how my portfolio has performed since inception (in March 2015) when the market was near its all-time high (which is never a good time to enter markets but my hands were tied):
| Portfolio/fund | % return since March 2015 (inception) |
| Damien's £50,000 portfolio | 6.50 |
| Passive Vanguard benchmark | 2.03 |
| CF - Woodford Equity Income | -1.73 |
| Average managed fund manager | -2.14 |
| FTSE 100 | -8.93 |
My portfolio has produced a profit of 6.5% despite investing near a market all-time high; despite the various crises we have experienced including a Greek crisis, a Chinese economic slowdown as well as a commodity crisis and now a brexit.
How my portfolio made so much money following the referendum
Put simply it was because I followed the 80-20 Investor algorithm. It's no coincidence that in the two days that followed the referendum the Best of the Best Selection as a whole made 5.23% profit. Unsurprisingly, despite markets tumbling, no stop loss alerts were triggered on this month's selection of funds.
If you break down the performance of my personal portfolio for the days that followed the referendum there are clues as to what drove the outperformance:
| Fund name | % reutrn in 2 days following the referendum |
| Threadneedle - Global Bond | 13.35 |
| First State - Global Listed Infrastructure | 9.07 |
| Fundsmith - Equity | 6.9 |
| Fidelity - Global Dividend | 6.66 |
| Vanguard - LifeStrategy 20% Equity | 2.21 |
| Jupiter - Absolute Return | 1.97 |
| Barclays - Sterling Bond | 1.68 |
| Cash | 0 |
If you've been following the previous updates on my £50,000 portfolio you will know that in recent months I deliberately
- moved out of funds with sole exposure to UK equities or European equities
- moved into global equity funds
- slightly increased the cash exposure in my portfolio
- increased my holdings in global bond funds
The reason for doing so was driven by the 80-20 Investor algorithm which clearly picked up a trend that had been occurring in the background for a few months, namely:
- the strength of global equities (particularly in the US) over UK & European equities
- the weakening of the pound
When the brexit vote was announced European and UK equities were hammered the hardest and the pound experienced its biggest one day fall in history. As investors rushed out of equities they sought safe havens such as bonds and government debt (i.e Treasuries). That meant that any assets you held in foreign currencies were instantly given a boost by the falling pound. That's because when you converted the asset's value back into pounds after the referendum it was worth more because of the new exchange rate. In addition, global bond funds also benefited from rising bond prices as investors panicked to buy them. That explains exactly why my portfolio was positioned in such a way and why it benefited so much.
Of course you always win some and you lose some and some could argue that my portfolio would have benefited more from still having my previously held Japanese equity fund rather than holding cash instead. While that is true there is no way of predicting exactly how markets behave and I won't beat myself up too much about it.
What next for my £50,000 portfolio?
For now I will leave my portfolio alone, at least until the next month's new Best of the Best Selection is published. As for how I see the potential returns in the near future it certainly won't be a one way street. If the pound was to suddenly strengthen then my profit will reduce. In addition if UK and European equities rally significantly then I will likely underperform for a period. It is important to be humble when investing and realise that profits are only real when you encash them and can go as easily as they arrive. Of course some of you will now have taken profits ahead of any future market uncertainty which is your prerogative. However, the point of my £50,000 portfolio is to show you how to best use 80-20 Investor and how to invest in all market conditions. So I of course will remain invested.
Yet what the recent episode has proven is the importance of having a process, such as 80-20 Investor, and sticking with it. In the week prior to the referendum investment markets had priced in a 'remain' vote as an almost certainty. So investors en masse reduced any protection they had against a possible brexit while at the same time piling into risk assets. It would have been easy to follow suit but 80-20 Investors didn't and are enjoying the benefit for now.
For the record my portfolio is still invested as below:
My current portfolio
| Fund | % allocation |
| Fundsmith Equity Fund | 20.27% |
| Fidelity Global Dividend | 13.36% |
| Barclays - Sterling Bond | 9.88% |
| Vanguard Lifestrategy 20% Equity | 20.16% |
| Cash | 7.61% |
| First State - Global Listed Infrastructure | 13.35% |
| Jupiter Absolute Return | 6.78% |
| Threadneedle Global Bond | 8.59% |
| TOTAL | 100% |
My current asset allocation
Global fixed interest - 20%
US equities - 26%
European equities - 8%
UK equities - 9%
Japanese equities - 2%
Other international equities - 0%
Cash - 13%
Property - 0%
UK Gilts - 3%
UK Fixed Interest 12%
Alternative assets/strategies - 7%
