A balanced global equity portfolio with a focus on developed markets and efficient costs

Report created on Feb 9, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the iShares Core MSCI World UCITS ETF, representing 66.67% of the total allocation. Additionally, 16.67% is allocated to both the iShares Core MSCI Emerging Markets IMI UCITS and Vanguard FTSE Developed Europe ex UK UCITS. This composition suggests a strong focus on developed markets with a moderate exposure to emerging markets. Compared to a typical balanced portfolio, this one leans significantly towards equities, which can provide growth but also comes with higher volatility. Consider diversifying into other asset classes to mitigate risk and enhance stability.

Growth Info

The portfolio's historical performance shows a Compound Annual Growth Rate (CAGR) of 11.32%, which is quite robust. However, it has experienced a maximum drawdown of -33.33%, indicating significant volatility during downturns. This performance is typical for equity-heavy portfolios, which can offer high returns but also come with substantial risks. Comparing this to a benchmark index, the returns appear competitive, though the drawdown highlights the need for a balanced risk management approach. Maintaining a diversified asset allocation could help mitigate such drawdowns in the future.

Projection Info

Forward projections using Monte Carlo simulations indicate an annualized return of 9.61%, with a majority of simulations showing positive outcomes. The Monte Carlo method uses historical data to simulate potential future returns, offering insights into possible scenarios. It's important to note that these projections are not guarantees, as they rely on past data and assumptions. The simulations suggest a 5th percentile return of 6.1% and a 67th percentile return of 313.6%. Consider these projections as a guide to understand potential outcomes, while staying aware of their limitations.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, with no allocation to bonds, cash, or other asset classes. This 100% equity exposure aligns with a growth-oriented strategy but may increase vulnerability to market volatility. In comparison to a balanced benchmark, which typically includes a mix of asset classes, this portfolio leans heavily towards equities. Diversifying into bonds or other asset classes could provide more stability and reduce risk, especially during market downturns.

Sectors Info

  • Technology
    24%
  • Financials
    17%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation reveals a strong emphasis on technology (24%) and financial services (17%), with other sectors like industrials and consumer cyclicals also well-represented. This sectoral composition is fairly diversified, although the tech-heavy focus could result in higher volatility, especially during periods of interest rate hikes. Comparing this to a common benchmark, the sector distribution appears balanced, but it's important to monitor sector trends and adjust allocations as needed to manage risk and capitalize on growth opportunities.

Regions Info

  • North America
    51%
  • Europe Developed
    27%
  • Asia Emerging
    8%
  • Asia Developed
    6%
  • Japan
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%
  • Europe Emerging
    1%

Geographic exposure is predominantly in North America (51%) and Europe Developed (27%), with smaller allocations to Asia Emerging and Developed regions. This geographic distribution provides a solid foundation of developed market exposure, which typically offers stability and growth potential. However, the relatively low allocation to emerging markets could limit the portfolio's ability to capitalize on higher growth opportunities in these regions. Consider gradually increasing exposure to emerging markets to enhance diversification and capture potential growth.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    35%
  • Mid-cap
    17%
  • Small-cap
    1%

The portfolio is primarily invested in mega (47%) and big (35%) cap companies, with limited exposure to medium and small caps. This market capitalization distribution suggests a focus on stability and established firms, which can offer reliable returns but may limit growth potential. Compared to a benchmark, this allocation aligns with a conservative strategy. To capture more growth opportunities, consider increasing exposure to medium and small-cap stocks, which can provide higher returns albeit with increased risk.

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.

While the portfolio is well-diversified across global equities, there may be room for optimization using the Efficient Frontier. This concept involves adjusting asset allocations to achieve the best possible risk-return ratio given the current assets. By exploring different combinations of the existing ETFs, it's possible to enhance returns without necessarily increasing risk. This optimization focuses on the current holdings and their potential reallocation, rather than introducing new assets, ensuring alignment with existing investment goals.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • Vanguard FTSE Developed Europe ex UK UCITS 0.10%
  • Weighted costs total (per year) 0.18%

The portfolio's total expense ratio (TER) is 0.18%, which is impressively low. This cost efficiency supports better long-term performance by minimizing expenses that can erode returns. Compared to industry averages, these costs are quite competitive, allowing for more of the portfolio's growth to be retained by the investor. Maintaining such low costs is beneficial, but it's also important to periodically review and ensure that the cost structure remains competitive as market conditions and investment options evolve.

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