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Those of us in our fifties have to fight for every basis point we can get

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Saturday is my birthday, which real Australians ignore like losing an arm to a shark. “Oh, it's nothing, mate… I'll hold the beer with the other one.” What sucks though is that I'm getting a bit older, which means I have less time until retirement.

The actuarial window required to expand my pension is closing fast. As Martin Amis wrote in his novel about the fifties The Pregnant Widow (I just read it; don't bother): “The minutes often dragged on, but the years tumbled over one another and disappeared.”

That's certainly how it feels to me, especially with four small children screaming for ice cream. My stated goal of having a seven-figure portfolio before my 60th birthday becomes more difficult with each revolution of the Earth around the sun.

Whereas at age 51 I needed an annual return of 8 percent, now I need 9 percent for Project One Million to be effective. That's a stretch – the long-term real annual return of the S&P 500 index is 6.5 percent, and that's about as good as it gets.

Luckily, I'm a journalist and no longer manage funds for a living, so I'm just as interested in the story as I am in the statistical probability of success. On the other hand, my portfolio has grown by 12 percent since my last birthday. I could still have a full head of hair.

In fact, 5 percent of the world's multi-asset funds have returned 9 percent annualized over the past eight years, according to data from LSEG Lipper. So it's not impossible – but my self-managed pension has only risen 6.8 percent since the start of the year. I have to hurry.

The strange thing is that my returns feel much better than that. Since January, I have made double-digit gains on my FTSE 100 fund. The same is true for my Asian fund. Together, these make up half of my total assets.

Sure, a quarter of my wealth is in government bonds. But they are a hedge – bonds recovered well during last week's stock market crash – and they do what they are supposed to. Given the strength of stocks, I am actually happy with their 2 percent return.

No, the gap between reality and my perception is mainly due to the recent crash in Japanese stocks, which has caused my fund's return to fall from 10 percent a month ago to 6 percent today – even though the market has recovered by 16 percent.

Due to the strong fluctuations, I also lost track of oil prices in 2024. The price of crude oil on the Nymex fell from 70 to 87 dollars per barrel in the first third of the year, back to 73 dollars in two months, and then rose by 14 percent in four weeks. Only to then lose everything again in a similarly short period of time.

I'm also surprised that my SPDR World Energy Fund, which was returning 13 percent the last time I looked, is now up just 4 percent. The ESG brigade will no doubt welcome this. But remember that lower fossil fuel prices boost demand.

So what I'm hoping to get from my wife on Saturday morning is some hot investment ideas. I'm still watching the iShares-listed private equity ETF, but a just-released Bank of America survey of global fund managers shows they're more confident that interest rates will be lower over the next 12 months than at any time this millennium.

Private equity loves cheaper money, but the maverick in me is gagging. If everyone thinks borrowing costs are going down, at worst they will surely go up. At best the lower interest rates are already priced in. I'm hoping for a better time to invest in private equity.

However, to achieve a 9 percent return, every basis point counts, so every now and then I like to compare the actual movements of my funds with the indices they are designed to track.

Because only the performance of my portfolio counts, and that includes all the fees that both the platform providers and the manufacturers of the ETFs themselves collect. Any tricks with exchange rates or tracking errors are also uncovered.

Just as my waist size is the end result of too many pub visits and too little windsurfing, returns on investment should only be measured in this way – and of course the industry doesn't like it when you do.

Take my emerging markets Asian ETF. Its gain since January 6 (during which there were no inflows or outflows) is 10.7 percent. However, the index is up 12.3 percent. Readers may see similar inconsistencies in their own funds.

What's going on? First of all, I chose an ETF that trades in pounds, with the dollar as the base currency. The pound has appreciated 1 percent against the greenback this year, so that's part of the difference.

On top of that, there are fees that amount to 23 basis points. I didn't incur any additional trading costs because I haven't deposited or withdrawn any money this year. That still leaves over 30 basis points of return unaccounted for. Not massive, but enough to pay the fees of another ETF.

Also mysterious. As was the fact that my FTSE 100 fund rose 2.3 percentage points more than the Footsie index itself. Then I remembered that the latter does not take into account dividends and buybacks, while I had chosen the option to reinvest or “accumulate” all payouts.

I also cannot explain other anomalies, such as why the benchmark index has risen by 7 percent since the beginning of the year, but my Japanese fund is 6 percent higher, even though the yen has lost almost 3 percent of its value against the pound. I should have only made 4 percent.

Not that I'm ungrateful for that – any more than I'm ungrateful for still having knees that bend. At 52, I'll take anything. But my birthday is a timely reminder that I need to take more risks – in my portfolio, if not swimming Down Under.

The author is a former portfolio manager. Email: [email protected]; Twitter: @stuartkirk__

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