Balanced Portfolio with Strong Global Diversification and Efficient Frontier Positioning
Risk profile
- Secure Speculative
The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.
Diversification profile
- Focused Diversified
The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.
What type of investor this portfolio is suitable for
Balanced Investors
This portfolio suits a balanced investor seeking moderate risk and broad diversification. Such an investor values both capital appreciation and risk management, with an investment horizon of at least five years. They are comfortable with market volatility but prefer a diversified approach to mitigate risks. The portfolio's efficient frontier positioning aligns with their goal of optimizing returns while maintaining a manageable risk level, making it ideal for those seeking a balanced growth strategy.
Positions
-
Vanguard FTSE Developed World UCITS ETF USD Accumulation
VHVE - IE00BK5BQV03 45.00% -
Vanguard S&P 500 UCITS Acc
VUAG - IE00BFMXXD54 45.00% -
Vanguard FTSE Emerging Markets UCITS ETF USD Accumulation GBP
VFEG - IE00BK5BQV03 10.00%
The portfolio is composed of three Vanguard ETFs, focusing on developed and emerging markets. With a 45% allocation each to the FTSE Developed World and S&P 500 ETFs, and 10% to the FTSE Emerging Markets ETF, it offers a balanced exposure to global equities. This composition reflects a broadly diversified strategy, which is ideal for spreading risk across various markets. The ETFs selected are known for their low costs and efficient tracking of their respective indices, making this portfolio a cost-effective choice for long-term growth.
Growth
Historically, the portfolio has demonstrated a commendable performance with a CAGR of 14.34%. This indicates a strong return on investment over time, albeit with a maximum drawdown of -28.87%, highlighting potential volatility. The days that account for 90% of returns are just 18, showing the importance of staying invested during key market movements. This performance suggests a robust growth trajectory, but it's crucial to remain mindful of the inherent risks associated with market fluctuations.
Projection
Utilizing a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. Assuming a hypothetical initial investment, the simulation indicated a 5th percentile return of 28.78% and a 50th percentile return of 343.47%. With 980 simulations resulting in positive returns, the annualized return across all simulations stands at 12.98%. This analysis provides a probabilistic insight into potential future outcomes, helping to set realistic expectations for returns while considering market uncertainties.
Asset classes
- Stocks 100%
- Other 0%
The portfolio is heavily concentrated in stocks, with 99.97% of assets allocated to equities. This high exposure to the stock market suggests an aggressive growth strategy, leveraging the potential for high returns. However, it also indicates a higher risk profile, as equities are subject to market volatility. For a more balanced risk approach, consider incorporating other asset classes like bonds, which can provide stability and reduce overall portfolio volatility.
Sectors
- Technology 29%
- Financials 15%
- Consumer Discretionary 11%
- Health Care 10%
- Industrials 9%
- Telecommunications 9%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
Sector allocation within the portfolio is diverse, with significant weightings in technology (28.54%), financial services (15.13%), and consumer cyclicals (10.50%). This sector distribution reflects a strategic focus on high-growth areas, particularly technology. While this can drive returns, it also introduces sector-specific risks. To mitigate these risks, consider periodically reviewing sector allocations to ensure they align with market conditions and personal risk tolerance.
Regions
- North America 78%
- Europe Developed 8%
- Asia Emerging 6%
- Japan 3%
- Asia Developed 3%
- Africa/Middle East 1%
- Australasia 1%
- Latin America 1%
- Europe Emerging 0%
Geographically, the portfolio is heavily skewed towards North America, comprising 77.52% of the allocation. While this provides exposure to a mature and stable market, it limits diversification benefits from other regions. Europe Developed (7.55%) and Asia Emerging (6.06%) offer some diversification, but there's room for improvement. To enhance geographic diversification, consider adjusting allocations to include more exposure to underrepresented regions, balancing potential growth opportunities and risks.
Ongoing product costs
- Vanguard FTSE Developed World UCITS ETF USD Accumulation 0.12%
- Vanguard S&P 500 UCITS Acc 0.07%
- Weighted costs total (per year) 0.09%
The portfolio benefits from low costs, with a total expense ratio (TER) of 0.09%. This cost-effective structure is advantageous for long-term investors, as lower fees can significantly enhance net returns over time. By maintaining a focus on low-cost ETFs, the portfolio efficiently captures market returns without eroding gains through high fees. To sustain this advantage, continue prioritizing cost-effective investment options and periodically review expense ratios to ensure they remain competitive.
Risk vs. return
This chart shows the Efficient Frontier, calculated using your current assets with different allocation combinations. It highlights the best balance between risk and return based on historical data. "Efficient" portfolios maximize returns for a given risk or minimize risk for a given return. Portfolios below the curve are less efficient. This is informational and not a recommendation to buy or sell any assets.
The portfolio is well-positioned on the efficient frontier, indicating an optimal balance between risk and return. However, there's potential to fine-tune the risk level to better match personal preferences. By adjusting allocations along the efficient frontier, one can achieve a riskier or more conservative stance. For those seeking higher returns, increase exposure to higher-risk assets. Conversely, for a more conservative approach, consider incorporating lower-risk investments like bonds to reduce volatility.
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