A balanced portfolio with strong tech focus and limited geographic diversification

Report created on Jan 5, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of two equally weighted ETFs, each holding 50% of the total investment. This structure offers a straightforward approach, primarily focusing on equities with a small cash component. Compared to typical balanced portfolios, this one leans heavily towards equities, lacking the usual mix of bonds or alternative assets. While this setup may benefit from potential high returns, it also exposes the portfolio to greater volatility. Consider incorporating a broader range of asset classes to enhance diversification and risk management.

Growth Info

Historically, the portfolio has demonstrated a strong Compound Annual Growth Rate (CAGR) of 12.78%, indicating robust growth over time. However, it also experienced a maximum drawdown of -14.96%, reflecting potential volatility during market downturns. These figures suggest that while the portfolio can achieve significant growth, it may also face periods of substantial decline. Comparing this performance to relevant benchmarks can provide further insights into its relative success. To mitigate potential losses, consider strategies to reduce drawdowns, such as diversifying across more asset classes.

Projection Info

Forward projections using Monte Carlo simulations estimate a range of potential outcomes, with an annualized return of 13.83%. Monte Carlo simulations use historical data to model future scenarios, but remember, they are not guarantees. The simulations indicate a high likelihood of positive returns, with 993 out of 1,000 simulations showing gains. However, the 5th percentile projection suggests that in the worst-case scenario, returns could be significantly lower. To better prepare for possible outcomes, consider stress-testing the portfolio against different market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily concentrated in stocks, accounting for 99.8% of its composition, with a negligible cash holding. This allocation suggests a focus on capital appreciation but at the expense of diversification. Compared to typical balanced portfolios, which might include bonds or other asset classes, this portfolio is more susceptible to equity market fluctuations. To enhance stability and reduce risk, consider adding fixed income or alternative investments, which can provide balance and potentially improve risk-adjusted returns.

Sectors Info

  • Technology
    44%
  • Consumer Discretionary
    12%
  • Health Care
    12%
  • Industrials
    8%
  • Energy
    7%
  • Consumer Staples
    5%
  • Basic Materials
    5%
  • Telecommunications
    4%
  • Financials
    1%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio has a significant concentration in the technology sector, making up 44.07% of the holdings. While this sector has been a strong performer, it may introduce higher volatility, especially during periods of interest rate changes. The remaining sectors, such as consumer cyclicals and healthcare, provide some diversification but are overshadowed by the tech-heavy focus. To mitigate sector-specific risks, consider redistributing some exposure to other sectors that may offer stability and growth potential, aligning with broader economic trends.

Regions Info

  • North America
    91%
  • Europe Developed
    5%
  • Japan
    2%
  • Australasia
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly exposed to North America, which constitutes 91.13% of the allocation. This heavy concentration limits international diversification, potentially increasing vulnerability to regional economic downturns. While North America has been a strong performer, diversifying into other regions like Europe or Asia could provide new growth opportunities and reduce geographic risk. Consider balancing the geographic allocation to better capture global market dynamics and enhance the portfolio's resilience against localized economic fluctuations.

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.

The portfolio could be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given level of risk. The current portfolio's expected return is slightly below the optimal return of 13.74% for the same risk level. By reallocating assets, the portfolio could potentially achieve higher returns without increasing risk. However, any optimization should consider the investor's goals and constraints, such as ethical considerations. Regularly reviewing the portfolio's efficiency can ensure it remains aligned with the investor's objectives.

Ongoing product costs Info

  • Invesco Markets II plc - Invesco Dow Jones Islamic Global Developed Markets UCITS ETF USD Acc 0.40%
  • iShares MSCI USA Islamic UCITS 0.50%
  • Weighted costs total (per year) 0.45%

The portfolio's total expense ratio (TER) is 0.45%, which is relatively moderate compared to industry averages. This cost structure supports better long-term performance by minimizing the drag on returns. However, it's always beneficial to periodically review and compare the costs against similar investment options. Lowering costs further, if possible, can enhance the net returns over time. Consider evaluating other funds or ETFs with lower fees that align with the portfolio's investment strategy and ethical guidelines.

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