A balanced portfolio with strong US focus and moderate sector diversification

Report created on Dec 30, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed of three ETFs, with significant allocations to the Vanguard S&P 500 UCITS Acc and Vanguard FTSE All-World UCITS ETF, each at 40%, and the Xtrackers II EUR Overnight Rate Swap UCITS ETF at 20%. This structure leans heavily on equities, reflecting a common balanced portfolio benchmark. The inclusion of a bond ETF provides some stability, although the equity focus is prominent. This composition is typical for balanced profiles, aiming to capture growth while mitigating volatility through fixed-income exposure. Consider reviewing the equity portion for potential overlaps that may limit diversification benefits.

Growth Info

Historically, this portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 11.49%. This is impressive compared to typical balanced portfolios, which often aim for lower returns with reduced risk. However, the maximum drawdown of -27.1% indicates significant volatility during downturns. While past performance is not indicative of future results, these figures suggest a robust growth potential coupled with occasional high-risk periods. Continual monitoring and potential rebalancing could help mitigate future drawdowns.

Projection Info

The portfolio's forward projection, based on 1,000 Monte Carlo simulations, shows a median outcome of 259.08% return, with most simulations yielding positive returns. Monte Carlo simulations use historical data to estimate future performance, but they cannot account for all market variables. The wide range between the 5th and 67th percentiles highlights potential volatility. While the annualized return of 10.5% is promising, it's crucial to remain aware of the limitations of these projections and prepare for variability.

Asset classes Info

  • Stocks
    80%
  • Bonds
    19%
  • Other
    1%

The portfolio's asset allocation is heavily skewed towards equities at approximately 80%, with bonds making up nearly 20%. This distribution aligns with many balanced portfolios but leans more towards growth. The high equity exposure suggests a focus on capital appreciation, while the bond allocation provides some risk mitigation. To enhance diversification, consider incorporating additional asset classes or adjusting existing weights to align more closely with personal risk tolerance and investment goals.

Sectors Info

  • Technology
    23%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is notably concentrated in technology at 23.31%, followed by financial services and consumer cyclicals. This tech-heavy approach aligns with current market trends but may expose the portfolio to volatility during economic shifts, such as interest rate changes. The diversity across other sectors like healthcare and industrials provides some balance, yet further diversification could reduce sector-specific risks. Review sector weights periodically to ensure alignment with broader market trends and personal investment objectives.

Regions Info

  • North America
    66%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, comprising nearly 66% of the allocation, with limited exposure to other regions. This concentration may limit diversification benefits and increase vulnerability to US market-specific risks. While North American markets have historically provided strong returns, diversifying into other regions could enhance risk management and capture growth opportunities in emerging markets. Consider gradually increasing non-US exposure for a more balanced global presence.

Redundant positions Info

  • Vanguard FTSE All-World UCITS ETF USD Accumulation
    Vanguard S&P 500 UCITS Acc
    High correlation

The portfolio contains highly correlated assets, particularly the Vanguard S&P 500 UCITS Acc and Vanguard FTSE All-World UCITS ETF. Correlation measures how assets move in relation to each other; high correlation can reduce diversification benefits. In a downturn, these assets may not provide the expected risk buffer. To enhance diversification, consider replacing one of the correlated ETFs with an asset that offers a different risk-return profile or exposure to distinct markets.

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 benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio. Current asset correlations suggest room for improvement by reducing overlap and enhancing diversification. Optimization does not guarantee higher returns but can help achieve a more balanced risk profile. Consider rebalancing the portfolio periodically to maintain an optimal allocation in line with evolving market conditions and personal investment objectives.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 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 impressively low at 0.14%, which supports better long-term returns by minimizing costs. Low fees are crucial for maximizing net returns, particularly in a balanced portfolio where cost efficiency can significantly impact performance. This alignment with cost-effective investment practices is commendable. Continue to monitor and compare expense ratios to ensure they remain competitive, and consider lower-cost alternatives if they become available.

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