Five ETFs for a simple multi-asset portfolio

Since this magazine started building and tracking stock screens in earnest in the early 2010s, our focus has been squarely trained on individual stocks.

There are good reasons for this, not least of which is the array of variables and fundamentals connected to each company. By using these in combination, we can filter an entire market to find the points of difference, and the ideas that fit whatever investing strategy we choose.

It’s possible to do this with other asset classes, but it can be tricky. The underlying differences between individual corporate bonds, to take just one example, are much less pronounced.

Still, that doesn’t mean we must stick to stocks or fundamentals-based filtering methods. This week’s new screen is an attempt to prove there are other options – although quite how effective it will prove remains to be seen.

Our starting point is the perspective of an investor trying to build a simple, multi-asset portfolio from a few core exchange traded funds (ETFs). While there are a million ways to skin this cat, I’ve opted for five trackers available from BlackRock’s iShares brand, which should offer a reasonable balance of diversification and liquidity.

These are the Core UK Gilts ETF (IGLT), the Physical Gold ETC (SGLN) and three international equity index trackers: the S&P 500 ETF (CSP1), the MSCI Emerging Markets Index Fund (EMIM) and the MSCI World ex-USA ETF (XUSE). Variations of all five are offered by other ETF providers.

By default, each ETF is given an equal weight when the multi-asset portfolio is refreshed each year. These weightings are then tweaked depending on how much each ETF trades above or below its one- and six-month moving averages. For the gold and gilts funds, averages are based on price, while the equity funds relate to their forward adjusted price/earnings multiples.

The table below shows how this works in practice.

2025 Five ETF Portfolio
ETF	Price	PE	a) Above 6mth avg*	b) Above 1mth avg*	c) Pricey rating^	Default weighting	Default – c)	Adjusted weighting
iShares Core UK Gilts UCITS	£9.83	–	0.7%	0.5%	0.6%	20%	19.4%	21.5%
iShares Physical Gold ETC	$64.47	–	6.5%	0.2%	3.4%	20%	16.6%	18.4%
iShares Core S&P 500 UCITS	£471.60	21.4	0.9%	1.3%	1.1%	20%	18.9%	20.9%
iShares Core MSCI EM IMI UCITS	£27.91	12.3	2.7%	0.6%	1.7%	20%	18.3%	20.3%
iShares MSCI World ex-USA UCITS	$5.71	14.9	4.6%	1.2%	2.9%	20%	17.1%	18.9%
*To price (gilts and gold) or to fwd adjusted PE (equity funds). ^Average of a) and b).

First, the screen looks for the premium at which each fund trades to its respective one- and six-month moving averages and combines this in a single ‘pricey rating’. This is then deducted from (or added to) the default 20 per cent allocation, which leads to an adjusted weighting relative to the other four funds. This year, for example, the high relative price and trading multiples of the gold and ex-USA ETFs, respectively, mean they face the greatest downward reweightings in the portfolio.

Given that the adjustments are somewhat slight, you might be wondering if they are necessary. My honest answer is that I’m not sure, although over the past three years, boosting weightings to stocks and bonds when they look oversold or undervalued (and vice versa) has largely worked (see chart).

Largely, but not always. Upping allocations to the gilt ETF amid its sell-off in the middle of 2022 wasn’t a fruitful trade, given the punishment it received later in the year. Pulling back on US equities in June 2023 – and to a lesser extent the following year – didn’t work either, despite chunky expansions in the index’s trading multiple in the months running up to the refreshes.

Yet the only fund for which this reweighting strategy consistently hasn’t worked is gold, given its steady march higher in recent years. In fact, taking some of the shine off the yellow metal accounts for all of the screen’s underperformance relative to a version that resets each ETF to a 20 per cent portfolio weighting each year (see chart).

I think it’s also worth acknowledging that a 20 per cent allocation to gold – while arguably justified by its long-run performance – is unusually high.

The point of a diversified, volatility-dampening portfolio (more on which below) is not to let any single asset’s performance swamp the overall balance of holdings, however strong. This can happen quickly. Indeed, an investor who bought equal portions of each ETF three years ago and held would today have 26 per cent in gold, and just under 14 per cent in gilts (see table).

Run your winners?
ETF	Weighting Jun 22	Performance	Weighting Jun 25
Gilts	20.0%	-12.4%	13.7%
Gold	20.0%	66.9%	26.1%
S&P 500	20.0%	41.5%	22.2%
MSCI EM	20.0%	12.6%	17.6%
MSCI World Ex-US	20.0%	30.2%	20.4%
Total/average	100%	27.7%	100%
Souce: LSEG. As at 6 June 2025

Given that the selection of these ETFs will play a large role in determining the portfolio’s performance, it’s worth taking a minute to explain the rationale here.

At first glance, the allocation to equities closely resembles the classic 60/40 portfolio mix of stocks and bonds – although the choice to split the holdings between the US, developed and emerging markets is intended to lower the massive exposure to America that comes with standard international equity indices.

Splitting the non-equity holdings between UK government bonds and gold changes the picture and offers the biggest source of differentiation to the screen’s benchmark, which is a mash-up of three popular 60/40-style passive funds: BlackRock’s ACS 60:40 Global Equity Tracker (GB00BYX7SD48), Vanguard LifeStrategy 60% Equity (GB00B3TYHH97) and HSBC’s Global Strategy Balanced Portfolio (GB00B76WP695).  

And while the heavy default allocation to gold has a whiff of investor Ray Dalio’s All-Weather Portfolio – so named for its ability to see out any market environment – the Bridgewater Associates man prefers a chunky 55 per cent weighting to bonds and a broader blend of commodities. Although the latter is offered by iShares (in the form of its Diversified Commodity Swap ETF (ICOM)), I’m slightly wary of its risks and think gold has done a better job of mitigating the corrosive effects of inflation.

After all, there’s a reason why the yellow metal recently surpassed the euro as central banks’ second most important reserve asset: in an uncertain world, this is an asset where demand is unlikely to dip.

As to whether it will help our portfolio beat its 60/40 peers, we’ll know more in a year’s time.