A globally diversified portfolio with a strong focus on North American equities

Report created on Jan 9, 2025

Risk profile Info

4/7
Balanced
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Diversification profile Info

4/5
Broadly Diversified
← Less diversification More diversification →

Positions

The portfolio consists of two ETFs: Vanguard FTSE All-World UCITS ETF (85%) and Vanguard FTSE North America UCITS ETF (15%). This composition leans heavily towards equities, offering exposure to global markets with a significant focus on North America. While broadly diversified, the reliance on a single asset class (stocks) and two ETFs may limit diversification benefits. Consider incorporating other asset classes, like bonds, to enhance stability and reduce risk, especially during market downturns.

Growth Info

Historically, the portfolio has demonstrated strong performance with a CAGR of 15.29%. This indicates impressive growth over time, significantly outperforming many market benchmarks. However, the max drawdown of -33.58% highlights potential volatility. While past performance is encouraging, it's essential to remember that it doesn't guarantee future results. Diversifying further could help mitigate risks during market downturns, maintaining steady growth.

Projection Info

A Monte Carlo simulation, which uses historical data to project future outcomes, suggests an annualized return of 17.83% across 1,000 simulations. Notably, 998 simulations showed positive returns, indicating a high probability of future gains. However, it's crucial to recognize the limitations of these projections, as they rely on historical data that may not predict future market conditions. Regularly reviewing and adjusting the portfolio can help align with changing market dynamics.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising nearly 100% of the allocation. This concentration in a single asset class can lead to higher volatility, as stocks are generally more susceptible to market fluctuations. While stock-heavy portfolios can offer substantial growth potential, incorporating other asset classes like bonds or real estate could provide diversification benefits, reducing overall risk and enhancing stability.

Sectors Info

  • Technology
    27%
  • Financials
    16%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is diverse, with notable concentrations in technology (26.57%) and financial services (16.19%). This reflects a common benchmark composition, indicating potential for growth, especially in tech-driven markets. However, tech-heavy portfolios may be more volatile during interest rate hikes. Balancing sector weights could mitigate risks associated with sector-specific downturns, ensuring a more stable performance across varying market conditions.

Regions Info

  • North America
    71%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographic exposure is predominantly in North America (70.59%), with limited exposure to other regions. While this aligns with many global benchmarks, it may expose the portfolio to region-specific risks, such as economic downturns in North America. Expanding geographic diversification could reduce these risks, providing a buffer against region-specific economic fluctuations and enhancing overall portfolio resilience.

Redundant positions Info

  • Vanguard FTSE North America UCITS ETF USD Accuimulation
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    High correlation

The two ETFs in the portfolio are highly correlated, which means they tend to move in the same direction. This high correlation limits the diversification benefits, as the portfolio may not be well-protected during market downturns. Reducing overlap by introducing less correlated assets can enhance diversification, providing a more balanced risk-return profile and improving overall portfolio resilience.

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 helps achieve the best possible risk-return ratio. However, before optimizing, addressing the high correlation between assets is crucial. By diversifying with less correlated assets, the portfolio can better position itself on the Efficient Frontier, maximizing returns for a given level of risk and improving overall efficiency.

Ongoing product costs Info

  • Vanguard FTSE North America UCITS ETF USD Accuimulation 0.10%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.20%

The portfolio's total expense ratio (TER) is 0.2%, which is relatively low. This cost efficiency supports better long-term performance by minimizing fees that can erode returns over time. Keeping costs low is a crucial aspect of investment success, as it allows more of the portfolio's gains to be retained. Regularly reviewing cost structures ensures continued alignment with cost-effective investment strategies.

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