Balanced and Diversified European-Centric Portfolio with Strong Historical Performance and Moderate Costs

Report created on Jul 2, 2024

Risk profile Info

4/7
Balanced
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Diversification profile Info

4/5
Broadly Diversified
← Less diversification More diversification →

Positions

The portfolio is largely composed of ETFs, with a significant focus on European markets. The Amundi Stoxx Europe 600 UCITS ETF makes up over half of the portfolio, indicating a strong tilt towards European equities. The Vanguard FTSE All-World UCITS ETF provides global diversification, covering a broad range of markets. Smaller allocations to emerging markets and small-cap stocks add diversity. This composition suggests a balanced approach with a focus on both stability and growth. To enhance diversification, consider evaluating the weighting of the European-focused ETFs and exploring other global opportunities.

Growth Info

Historically, the portfolio has delivered a solid compound annual growth rate of 10.29%, demonstrating robust performance over time. However, it has experienced a maximum drawdown of -34.78%, indicating significant volatility during downturns. The portfolio's returns are concentrated in a few days, which is typical for equity-heavy portfolios. This performance suggests that while the portfolio has potential for high returns, it also comes with substantial risk. To mitigate such risks, consider incorporating more defensive assets or strategies that can provide stability during market turbulence.

Projection Info

Using a Monte-Carlo simulation, which models potential future performance based on historical data, the portfolio shows promising outcomes. With a hypothetical initial investment, the simulations indicate a wide range of possible returns, with a median projection of 229.47%. This suggests a favorable risk-return profile for the portfolio, though outcomes can vary significantly. The high number of simulations with positive returns highlights the potential for growth. To align with personal goals, consider adjusting the portfolio to balance potential returns with acceptable risk levels, particularly by managing exposure to high-volatility assets.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising over 99% of the total allocation. This significant exposure to equities suggests a focus on capital appreciation rather than income or preservation. The minimal allocation to bonds and cash indicates a higher risk tolerance and willingness to endure market fluctuations. For a more balanced risk profile, consider diversifying into other asset classes such as bonds or real estate, which can provide stability and income. This can help cushion the portfolio against market volatility and enhance long-term resilience.

Sectors Info

  • Financials
    18%
  • Industrials
    15%
  • Technology
    15%
  • Health Care
    13%
  • Consumer Discretionary
    10%
  • Consumer Staples
    8%
  • Basic Materials
    5%
  • Telecommunications
    5%
  • Energy
    5%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation within the portfolio is diverse, with a notable emphasis on financial services, industrials, and technology. These sectors are known for their growth potential, but they can also be cyclical and sensitive to economic changes. The portfolio's exposure to defensive sectors, such as healthcare and consumer staples, provides some stability. This mix reflects a balanced approach to sector diversification. To optimize sector allocation, consider periodically reviewing sector performance and adjusting weights to align with market conditions and personal investment goals.

Regions Info

  • Europe Developed
    63%
  • North America
    24%
  • Asia Emerging
    4%
  • Japan
    3%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Europe Emerging
    1%

Geographically, the portfolio is concentrated in developed European markets, accounting for over 62% of the allocation. This focus on Europe provides exposure to stable and mature economies but may limit growth opportunities in other regions. North America and Asia are also represented, albeit to a lesser extent. This geographic distribution suggests a preference for developed markets. To enhance global diversification, consider increasing exposure to emerging markets, which can offer higher growth potential and reduce reliance on any single economic region.

Redundant positions Info

  • Amundi Stoxx Europe 600 UCITS ETF C EUR
    Xtrackers MSCI Europe Small Cap UCITS ETF
    High correlation
  • iShares MSCI World Value Factor UCITS
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    iShares MSCI World Small Cap UCITS ETF USD (Acc)
    High correlation

The portfolio exhibits notable correlations among its assets, particularly between the Amundi Stoxx Europe 600 UCITS ETF and the Xtrackers MSCI Europe Small Cap UCITS ETF. This correlation suggests that these assets move in tandem, potentially reducing diversification benefits. Other assets, like the iShares MSCI World Value Factor UCITS and the Vanguard FTSE All-World UCITS ETF, also show high correlation. To improve diversification, consider reducing exposure to highly correlated assets and incorporating investments with different return drivers, which can help mitigate risk and enhance returns.

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.

Click on the colored dots to explore allocations.

Before optimizing, focus on reducing overlaps in highly correlated assets, as they don't add diversification benefits. Once addressed, the portfolio can be adjusted along the efficient frontier to achieve desired risk-return profiles. A riskier portfolio could be developed by increasing exposure to growth-oriented assets, while a more conservative approach could involve adding bonds or other defensive assets. This optimization process can enhance returns while maintaining a risk level aligned with personal tolerance and investment goals.

Ongoing product costs Info

  • iShares Edge MSCI EM Value Factor UCITS ETF USD (Acc) 0.40%
  • Xtrackers MSCI Europe Small Cap UCITS ETF 0.30%
  • iShares MSCI World Value Factor UCITS 0.30%
  • iShares MSCI World Small Cap UCITS ETF USD (Acc) 0.35%
  • Amundi Stoxx Europe 600 UCITS ETF C EUR 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is relatively low and indicates cost-efficiency. The largest holding, Amundi Stoxx Europe 600 UCITS ETF, has a very low fee of 0.07%, contributing to the overall cost-effectiveness. While other ETFs have slightly higher fees, they remain within a reasonable range. Keeping costs low is crucial for long-term investment success, as fees can significantly impact net returns over time. To maintain cost efficiency, regularly review and compare the fees of existing and potential new investments, ensuring they align with the portfolio's objectives.

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