A conservative portfolio with global ETFs and moderate diversification across sectors and regions

Report created on Dec 11, 2024

Risk profile Info

2/7
Conservative
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists primarily of ETFs with a significant allocation to global equities. Notably, the HSBC MSCI World UCITS ETF and Xtrackers II EUR Overnight Rate Swap UCITS ETF dominate the portfolio, making up over 70% of the total allocation. The inclusion of Xetra-Gold and CoinShares Physical Bitcoin provides a small exposure to alternative assets. The moderate diversification suggests a focus on stability and global exposure. Diversification is essential as it helps to spread risk and potentially enhance returns. To improve diversification, consider adding more varied asset classes or sectors, especially those underrepresented in the current allocation.

Growth Info

Historically, this portfolio has delivered a compound annual growth rate (CAGR) of 9.2%, which is impressive for a conservative risk profile. The maximum drawdown of -10.51% indicates resilience during market downturns. However, past performance does not guarantee future results, as market conditions can change. Understanding how the portfolio has performed in different market environments provides valuable insights for future decision-making. Consider maintaining the current asset allocation to preserve its historical risk-return profile, while staying informed about market trends that could impact performance.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With an annualized return of 17.39%, and a 5th percentile outcome of 64.46%, the portfolio has a positive outlook. However, simulations are not predictions and should be interpreted with caution, as they rely on historical data which may not reflect future market conditions. This analysis highlights the potential variability in returns, underscoring the importance of maintaining a balanced and adaptable strategy. Consider periodic reviews of the portfolio to align with changing market conditions and personal investment goals.

Asset classes Info

  • Stocks
    59%
  • Bonds
    35%
  • Other
    2%

The portfolio's allocation is primarily in stocks (59.43%) and bonds (34.97%), with minimal exposure to other asset classes. This allocation reflects a conservative strategy, balancing growth and income. Stocks offer potential for capital appreciation while bonds provide stability and income. The limited exposure to alternative assets like gold and cryptocurrency adds a slight diversification benefit. To enhance diversification, consider increasing allocations to other asset classes such as real estate or commodities, which may provide additional protection against market volatility.

Sectors Info

  • Technology
    16%
  • Financials
    9%
  • Health Care
    6%
  • Consumer Discretionary
    6%
  • Industrials
    6%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation is moderately diversified, with a notable concentration in technology (15.76%) and financial services (9.35%). Other sectors like healthcare, consumer cyclicals, and industrials also have significant representation. Sector diversification is crucial as different sectors perform differently under various economic conditions. A concentration in a few sectors can increase risk if those sectors underperform. Consider rebalancing the portfolio to reduce sector concentration and increase exposure to underrepresented sectors like utilities and real estate for added stability.

Regions Info

  • North America
    44%
  • Europe Developed
    9%
  • Japan
    3%
  • Australasia
    1%
  • Asien Schwellenländer
    1%
  • Asien
    1%

The portfolio has significant geographic exposure to North America (43.65%) and developed Europe (9.02%), with limited representation in emerging markets. Geographic diversification helps mitigate risks associated with regional economic downturns and political instability. A heavy reliance on North America could expose the portfolio to regional risks. Consider increasing exposure to emerging markets and other regions to capture growth opportunities and further diversify geographic risk, which may enhance long-term returns.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly among the global equity ETFs. High correlation means these assets tend to move together, reducing diversification benefits. Diversification is enhanced when assets have low correlation, as it helps spread risk across different market conditions. To improve diversification, consider replacing some of the correlated ETFs with assets that have historically low correlation to the existing portfolio. This can potentially improve the overall risk-adjusted return.

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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. However, optimization should focus on current assets and their allocation, without introducing new ones. By adjusting the weightings of existing assets, the portfolio can become more efficient, maximizing returns for a given level of risk. Consider reducing exposure to highly correlated ETFs and reallocating to underrepresented sectors or regions to improve efficiency. This strategy can enhance the portfolio's performance while maintaining its conservative risk profile.

Dividends Info

  • HSBC MSCI World UCITS ETF 0.70%
  • Vanguard FTSE All-World UCITS ETF 1.20%
  • Weighted yield (per year) 0.45%

The portfolio's dividend yield is relatively low at 0.45%, reflecting a focus on growth-oriented ETFs. Dividends provide a steady income stream and can enhance total returns, especially in volatile markets. A low yield may indicate a preference for capital appreciation over income. Consider incorporating higher-yielding assets to increase income potential, which can be particularly beneficial for conservative investors seeking regular cash flow. This could involve adding dividend-focused ETFs or individual dividend-paying stocks.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • HSBC MSCI World UCITS ETF 0.15%
  • iShares MSCI ACWI UCITS ETF 0.20%
  • Vanguard FTSE All-World UCITS ETF 0.22%
  • Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C 0.10%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is 0.14%, which is relatively low and beneficial for long-term growth. Lower costs mean more of your returns stay in your pocket, compounding over time. High costs can erode returns, especially in a conservative portfolio where returns are generally modest. Continue to monitor and minimize costs by selecting low-cost ETFs and considering the impact of fees on overall performance. This approach can improve net returns and contribute to achieving long-term financial goals.

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