A highly diversified cautious portfolio with global exposure and focus on large-cap stocks

Report created on Feb 24, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is primarily composed of two equity ETFs and one gold ETC. The Vanguard FTSE All-World UCITS ETF makes up 65% of the portfolio, while the iShares Core MSCI World UCITS ETF accounts for 25%. The remaining 10% is allocated to the iShares Physical Gold ETC. This composition reflects a strong emphasis on equity investments with a small allocation to gold for diversification. Compared to a typical benchmark, this portfolio is heavily weighted towards equities, with no exposure to bonds. This structure suits a cautious risk profile, providing growth potential while incorporating a defensive asset like gold.

Growth Info

Historically, this portfolio has shown a CAGR of 12.41%, indicating strong growth over time. The maximum drawdown of -13.86% suggests that while there have been downturns, the portfolio has been relatively resilient. The portfolio's performance is impressive compared to many benchmarks, especially given its cautious risk classification. However, it's important to remember that past performance doesn't guarantee future results. To maintain performance, regular reviews and adjustments may be necessary, especially in response to market changes.

Projection Info

Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio's potential future performance looks promising. With an annualized return of 14.79% across simulations, the portfolio is expected to continue growing. However, the 5th percentile projection shows a 186.5% return, indicating potential variability in outcomes. While these simulations provide a useful forecast, they are based on historical trends and cannot predict future market conditions with certainty. Monitoring and adjusting the portfolio as needed can help manage risk and capitalize on growth opportunities.

Asset classes Info

  • Stocks
    90%
  • Other
    10%

The portfolio is heavily weighted towards stocks, with 90% allocated to equities and 10% to other assets, specifically gold. This allocation is typical for a portfolio seeking growth, as equities generally offer higher returns than bonds or cash over the long term. However, the lack of bond exposure means the portfolio may experience higher volatility. Diversifying into additional asset classes, such as bonds, could provide more stability and reduce risk, aligning better with a cautious risk profile while maintaining growth potential.

Sectors Info

  • Technology
    23%
  • Financials
    15%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation shows a significant concentration in technology (23%), followed by financial services (15%) and consumer cyclicals (10%). This distribution aligns with global market trends but may expose the portfolio to sector-specific risks, such as interest rate fluctuations affecting tech stocks. While this sector composition can drive growth, it's crucial to monitor sector performance and adjust allocations if necessary. Balancing sector weights with less volatile sectors like healthcare or utilities could enhance stability without sacrificing growth.

Regions Info

  • North America
    62%
  • Europe Developed
    13%
  • Japan
    5%
  • Asia Emerging
    4%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic exposure is heavily skewed towards North America (62%), with lesser allocations to Europe Developed (13%) and Japan (5%). This concentration in North America reflects global market capitalization trends but may increase risk if regional markets underperform. Expanding exposure to emerging markets or underrepresented regions could enhance diversification and capture growth opportunities in developing economies. Regularly reviewing geographic allocations can ensure the portfolio remains well-balanced and aligned with global market dynamics.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    32%
  • Mid-cap
    15%

The portfolio's market capitalization exposure is predominantly in mega (42%) and big (32%) cap stocks, with medium cap stocks making up 15%. This focus on large-cap stocks provides stability and lower volatility compared to small-cap stocks, aligning with a cautious risk profile. However, including small or micro-cap stocks could enhance diversification and offer higher growth potential. Balancing market cap exposure can help optimize the risk-return profile while maintaining a focus on established companies.

Redundant positions Info

  • iShares Core MSCI World UCITS ETF USD (Acc)
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    High correlation

The portfolio's two main equity ETFs, Vanguard FTSE All-World and iShares Core MSCI World, are highly correlated, meaning they tend to move together. This high correlation limits diversification benefits, as similar assets may react similarly during market downturns. Reducing the overlap by incorporating less correlated assets could improve diversification and risk management. Exploring alternative ETFs or asset classes with lower correlation could enhance the portfolio's resilience to market 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 can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. This optimization suggests an expected return of 15.73% at the same risk level, higher than the current portfolio's expected return. By adjusting allocations among existing assets, the portfolio could achieve better efficiency. However, it's important to note that efficiency focuses on risk-return balance and may not address other goals like diversification. Regular optimization reviews can help maintain alignment with investment objectives.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.19%

The portfolio's total expense ratio (TER) is 0.19%, which is relatively low and supports better long-term performance by minimizing costs. Keeping costs down is crucial for maximizing returns, especially over extended investment periods. Regularly reviewing and comparing expense ratios of alternative ETFs can ensure the portfolio remains cost-efficient. While the current costs are reasonable, exploring lower-cost options or fee reductions can further enhance the portfolio's performance.

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