S&S ISA Experiment – September 2021

I haven’t provided an update on my S&S ISA experiment since the May 2021 update, but 3 months on I think there might be a few interesting things to note.

Very quick reminder – because of the challenges in holding index funds outside of a “pension” for Americans abroad, I’m trying a “pseudo-indexing” approach in my ISA, buying individual stocks in the hope of replicating the performance of the FTSE 100. I’m baselining my performance against a FTSE 100 ETF (CUKX, not VWRP as I mentioned before – that’s an all-world fund, so not quite a fair comparison!).

Major updates since May:

  • I was due to remortgage our house, and with interest rates so absurdly low (1.26% for our new 5 year fix), we decided to take some cash out. Some of that is earmarked for future home improvements, but I used part of it to max out both my and my wife’s ISA allowances for the year.
  • For my wife’s ISA, I picked a different 20 stocks – still all UK ones, but because I’d already picked 20 of the largest UK companies for my ISA, this means hers has quite a few smaller companies. A few of these are bordering on stock picking instead of indexing – still companies I plan to hold for the long term, but an £800 million market cap company is quite different compared to a £131 Billion one. Average market cap is £39 billion in my ISA, and £9 billion in hers. Will be interesting to see how much of a difference that makes!
  • I also opened LISAs for both of us, shortly before my wife turned 40. I don’t plan on contributing a lot to these, because my biggest concern is the gap between early retirement and pension/401k/IRA access ages, but figured it was prudent to open one before she aged out. Each of them only has about £125 in them (£100 from us, £25 from Her Majesty), with a single stock (different from the other 40 in our S&S ISAs), so not going to move the needle.

Performance Update

Big picture, there’s not much difference to be seen between our ISAs and the FTSE 100, although, to be fair, most of the change in value is driven by ongoing contributions. It will be interesting to see any difference between now and the next contributions in April 2022.

Break it down some more, and there is a rather more obvious difference in the monthly growth figures, although they wind up averaging out to pretty much the same:

And when you break it into the individual stocks, the differences between them are particularly striking. As a prime example, we bought M&S in my wife’s ISA only a few days before the price spiked – pure good luck, rather than any foresight on my part!

After expenses, both for purchase and predicted expenses for sale, we’re up a total of not quite £300 on a £40,500 investment. Hardly life-changing, but, by pure luck, it’s about £700 better than we’d be doing in a FTSE 100 tracker fund. Since this is replacing a chunk of UK exposure in my overall asset allocation, I’m happy with that.


Hargreaves Lansdown, my ISA brokerage, puts out a lot of articles. Most of these are shilling for active funds that I can’t buy and wouldn’t even if I could, but occasionally there’s something interesting. In particular, one on the evolution of the FTSE 100 index caught my eye, especially this graphic:

It’s obvious that Materials (mostly mining) and Financials (mostly banks) are a huge part of the FTSE 100 – 36.6% to be exact. But I’ve chosen to skip the largest players in these sectors, so my “pseudo-index” is missing around a third of the actual index. I do have some exposure to those sectors: CRH is a construction materials company, Croda in chemicals, and we have a few companies around the financials space (Aviva for insurance, Experian in mostly credit rating, the London Stock Exchange itself, and a merchant bank in Close Brothers). But we’re missing the obvious big names: no HSBC, Rio Tinto, BHP, Glencore, Anglo American, Barclays, Lloyds, and so on.

In a way, it’s remarkable how closely my ISA is performing compared to the index despite this discrepancy, at least so far. I haven’t changed my opinion on these sectors – the extractive materials companies in the FTSE are borderline (or beyond!) exploitative while the banks aren’t much better, plus I expect them to struggle in this extremely low interest rate environment. You can get a higher interest rate from Premium Bonds than on some mortgages!

So, I’m not changing the allocation of my ISA – the high transaction fees (about £24 to sell one and buy another) put me off anyway. But if something dramatic happens to either the Materials or Financials sectors, it wouldn’t be surprising if my performance diverges from the index.

Overall, I’d say the experiment is going well – I’m generally tracking the index, no major concerns there, and the mechanics are manageable. I do have ongoing Excel sheets for both dividends and basis tracking, so I’m not expecting US taxes to be anything too terrible, but we’ll see. So far, so good!


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