A broadly diversified portfolio with strong global exposure and a balanced risk profile
Report created on Dec 25, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
IU iShares MSCI ACWI UCITS ETF
IUSQ - IE00B6R52259 70.00% -
SX iShares Core S&P 500 UCITS ETF USD (Acc)
SXR8 - IE00B5BMR087 30.00%
This portfolio is composed of two ETFs: iShares MSCI ACWI UCITS ETF (70%) and iShares Core S&P 500 UCITS ETF USD (Acc) (30%). This structure leans heavily towards equity, with minimal allocation to other asset classes like cash and bonds. Compared to common benchmarks, this portfolio is heavily equity-focused, which aligns with a balanced risk profile. The high equity percentage can lead to greater potential returns but also increases exposure to market volatility. To enhance diversification, consider adding other asset classes like bonds or real estate, which can provide stability during market downturns.
Growth
The portfolio has shown a strong historic performance with a Compound Annual Growth Rate (CAGR) of 12.44% and a maximum drawdown of -33.67%. This indicates robust growth potential but also significant risk during downturns. The performance is competitive compared to global equity benchmarks, suggesting effective growth strategies. However, reliance on past performance can be misleading as it doesn't guarantee future results. To mitigate risks, consider incorporating risk management strategies like stop-loss orders or periodic rebalancing to maintain desired risk levels.
Projection
Monte Carlo simulations, which use historical data to predict future outcomes, suggest an annualized return of 14.35% with a high probability of positive returns. The 5th percentile projection is 108.38%, indicating a strong chance of maintaining capital. However, remember that simulations are based on past data and don't account for future market changes. To prepare for various scenarios, regularly review projections and adjust the portfolio as needed, considering potential economic shifts or policy changes that could impact global markets.
Asset classes
- Stocks 100%
The portfolio is predominantly invested in stocks (99.56%), with negligible allocations to cash, bonds, and other assets. This heavy stock allocation aligns with a growth-focused strategy but limits diversification benefits. Compared to typical balanced portfolios, this allocation is skewed towards equities, which can lead to higher volatility. To enhance diversification, consider integrating more bonds or alternative investments, which can help mitigate risk while maintaining growth potential.
Sectors
- Technology 29%
- Financials 15%
- Consumer Discretionary 11%
- Health Care 10%
- Industrials 9%
- Telecommunications 9%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
The portfolio has a significant allocation to the technology sector (29.21%), followed by financial services and consumer cyclicals. This concentration in technology can lead to higher volatility, especially during periods of interest rate changes. Compared to benchmarks, the sector allocation is well-diversified across major industries. However, to reduce sector-specific risks, consider balancing exposure by increasing allocations to underrepresented sectors like utilities or real estate, which can offer stability during market fluctuations.
Regions
- North America 78%
- Europe Developed 10%
- Asia Emerging 4%
- Japan 3%
- Asia Developed 3%
- Australasia 1%
- Africa/Middle East 1%
- Latin America 1%
The portfolio is heavily weighted towards North America (78.49%), with limited exposure to other regions. This geographic concentration can increase risk, particularly if the North American market faces downturns. Compared to global benchmarks, there's a notable underexposure to emerging markets and Europe. To improve geographic diversification, consider increasing allocations to regions like Asia or Europe, which can provide growth opportunities and reduce reliance on a single market's performance.
Redundant positions
-
High correlationiShares MSCI ACWI UCITS ETFiShares Core S&P 500 UCITS ETF USD (Acc)
The portfolio's assets, iShares MSCI ACWI UCITS ETF and iShares Core S&P 500 UCITS ETF, are highly correlated, meaning they tend to move together. This limits diversification benefits during market downturns, as both assets may decline simultaneously. While correlation can enhance returns during bull markets, it increases risk during downturns. To improve diversification, consider including assets with lower correlation to existing holdings, such as bonds or commodities, which can provide stability when equities are volatile.
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 helps achieve the best possible risk-return ratio by adjusting asset weights. However, the current high correlation between assets limits potential diversification benefits. To optimize, focus on reducing overlap and incorporating uncorrelated assets, which can enhance risk-adjusted returns. Keep in mind that optimization is based solely on current assets, and changes in allocation can impact overall portfolio efficiency.
Ongoing product costs
- iShares MSCI ACWI UCITS ETF 0.20%
- iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
- Weighted costs total (per year) 0.18%
The portfolio's total expense ratio (TER) is 0.18%, which is impressively low and supports better long-term performance by minimizing costs. Compared to industry averages, this TER is competitive, indicating cost-effective management. Keeping costs low is crucial for maximizing net returns over time. Continue monitoring expense ratios and consider switching to lower-cost options if available. Regularly review the cost structure to ensure it remains aligned with your investment strategy and financial goals.
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