Balanced and Diversified Portfolio with Strong Tech Focus Suitable for Moderate Risk Investors

Report created on Jun 15, 2024

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.

Positions

The portfolio is composed of four ETFs, with a significant allocation towards global equities. The iShares Core MSCI World UCITS ETF and the iShares Core S&P 500 UCITS ETF make up 80% of the portfolio, providing broad market exposure. The Xtrackers MSCI World Information Technology UCITS ETF adds a tech-focused element, while the Xtrackers MSCI Emerging Markets UCITS ETF offers exposure to developing economies. This composition indicates a well-diversified approach, though it leans heavily towards equities, suggesting a focus on growth. The portfolio's balanced risk profile is suitable for investors who can tolerate some market fluctuations.

Growth Info

Historically, the portfolio has delivered impressive returns, with a CAGR of 14.26%. This performance suggests a strong growth trajectory, although it has experienced a maximum drawdown of -33.2%, highlighting potential volatility. The returns are concentrated in a few days, indicating that market timing could significantly impact outcomes. This historical performance underscores the potential benefits of long-term holding and staying invested during market downturns. Investors should be prepared for periods of volatility but can expect substantial long-term growth if they remain committed to their investment strategy.

Projection Info

Using a Monte Carlo simulation, which models potential future portfolio performance under various market conditions, we see promising outcomes. Assuming a hypothetical initial investment, the median projection indicates a 556.45% increase, with 998 simulations showing positive returns. This suggests a high probability of favorable results, though the 5th percentile at 115.86% highlights potential downside risks. This forward-looking analysis reinforces the portfolio's growth potential but also the need for an investment horizon that can weather market fluctuations. Investors should consider their risk tolerance and time horizon when interpreting these projections.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.76% in equities, reflecting a growth-oriented strategy. This allocation aligns with a higher risk tolerance, as equities typically offer higher returns but come with increased volatility. The minimal presence of cash and bonds suggests limited downside protection, which could be a concern during market downturns. To enhance stability, investors might consider incorporating more fixed-income assets. However, given the portfolio's current structure, it is well-suited for those seeking capital appreciation and who are comfortable with the associated risks.

Sectors Info

  • Technology
    36%
  • Financials
    14%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Industrials
    8%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is heavily concentrated in the technology sector, which accounts for 35.62% of the allocation. This focus on tech suggests an expectation of continued innovation and growth in this area. Other significant sectors include financial services and consumer cyclicals, providing some diversification. However, the concentration in technology could increase volatility, as this sector can be more sensitive to market changes. Investors may want to consider diversifying further across other sectors to balance risk and reduce dependency on tech performance.

Regions Info

  • North America
    77%
  • Europe Developed
    8%
  • Asia Emerging
    5%
  • Asia Developed
    3%
  • Japan
    3%
  • Africa/Middle East
    1%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, making up 77.44% of the allocation. This focus suggests confidence in the stability and growth prospects of the U.S. and Canadian markets. While there is some exposure to Europe and Asia, the limited allocation to emerging markets and other regions may restrict growth opportunities. To enhance geographic diversification, investors might consider increasing exposure to underrepresented regions, which could provide additional growth potential and reduce reliance on North American markets.

Redundant positions Info

  • iShares Core S&P 500 UCITS ETF USD (Acc)
    iShares Core MSCI World UCITS ETF USD (Acc)
    Xtrackers MSCI World Information Technology UCITS ETF 1C
    High correlation

The portfolio exhibits high correlation among its assets, particularly between the iShares Core S&P 500 UCITS ETF, iShares Core MSCI World UCITS ETF, and Xtrackers MSCI World Information Technology UCITS ETF. This correlation indicates that these assets tend to move in the same direction, which may limit diversification benefits. While this can enhance returns during market upswings, it also increases vulnerability during downturns. To optimize diversification, investors might explore adding assets with lower correlations to reduce risk and improve overall portfolio stability.

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 the portfolio, focus on removing overlapping assets that don't add diversification benefits. A more efficient portfolio can be achieved by reducing highly correlated assets, thereby enhancing diversification. To achieve a riskier portfolio, increase allocation to equities, while shifting towards bonds or cash can make it more conservative. Moving along the efficient frontier allows for adjustments in risk-return balance, aligning with individual risk tolerance and financial goals. Consider these strategies to optimize the portfolio's performance without sacrificing its core strengths.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • Xtrackers MSCI World Information Technology UCITS ETF 1C 0.25%
  • Xtrackers MSCI Emerging Markets UCITS ETF 1C 0.18%
  • Weighted costs total (per year) 0.18%

The portfolio's costs are relatively low, with a Total Expense Ratio (TER) of 0.18%. This cost efficiency is beneficial for long-term investors, as lower fees can significantly enhance net returns over time. The individual ETFs have TERs ranging from 0.12% to 0.25%, which are competitive in the market. Maintaining a low-cost structure should remain a priority, as it allows more of the investment gains to be retained. Investors should continue to monitor these costs and consider them when making adjustments to the portfolio.

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