Balanced Risk Portfolio with Strong Global Diversification and Consistent Growth Potential
Report created on Jun 23, 2024Risk profile
4/7
Diversification profile
3/5
Positions
-
IW iShares MSCI World EUR Hedged UCITS ETF (Acc)
IWDE - IE00B441G979 100.00%
The portfolio consists entirely of the iShares MSCI World EUR Hedged UCITS ETF, which provides exposure to a broad range of global equities. This ETF offers a diversified investment across multiple sectors and regions, aligning with a balanced risk profile. The portfolio's 100% allocation to this single ETF simplifies management but also means that diversification is managed by the ETF itself. This composition is suitable for investors looking for a straightforward yet globally diversified equity exposure, while also benefiting from currency hedging to mitigate foreign exchange risk.
Growth
Historically, the portfolio has demonstrated a strong performance with a compound annual growth rate (CAGR) of 9.58%. This indicates a solid return on investment over time, although it's important to note the maximum drawdown of -33.33%, reflecting the potential for significant short-term losses. The portfolio's returns are concentrated, with only 27 days accounting for 90% of the gains. This performance suggests that while the portfolio has delivered impressive growth, it may experience periods of volatility, requiring a long-term investment horizon to fully capitalize on its potential.
Projection
Using a Monte Carlo simulation, we projected the potential future performance of the portfolio with 1,000 simulations. The results show a median (50th percentile) end portfolio value growth of 249.45%, with a positive return in 976 out of 1,000 simulations. The annualized return across all simulations is 9.99%. This analysis highlights the portfolio's potential for continued growth, although outcomes can vary significantly. Monte Carlo simulations provide insight into a range of possible future scenarios, helping investors understand the probabilities of different return levels and prepare for various market conditions.
Asset classes
- Stocks 101%
The portfolio is heavily weighted in equities, with over 101% allocated to stocks, indicating a strong focus on growth potential. There is minimal exposure to bonds and other asset classes, which could limit the portfolio's ability to provide stability during market downturns. This asset allocation aligns with a balanced risk profile but may not fully mitigate volatility. Investors seeking to reduce risk might consider diversifying into more stable asset classes, such as bonds, to balance the potential for growth with greater capital preservation during market fluctuations.
Sectors
- Technology 27%
- Financials 16%
- Health Care 11%
- Consumer Discretionary 10%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
Sector allocation within the portfolio is diverse, with significant exposure to technology (26.86%), financial services (15.53%), and healthcare (10.97%). This distribution provides a broad coverage of various industries, which can help mitigate sector-specific risks. However, the heavy weighting in technology could increase vulnerability to sector downturns. A balanced sector allocation supports the portfolio's growth objectives while providing some level of risk management. Investors might consider periodically reviewing sector weights to ensure alignment with their risk tolerance and market conditions.
Regions
- North America 77%
- Europe Developed 15%
- Japan 5%
- Australasia 2%
- Asia 1%
Geographically, the portfolio is predominantly invested in North America (76.63%), with additional exposure to developed Europe (15.06%) and Japan (5.33%). This concentration reflects a strong focus on developed markets, which may offer stability and growth but could limit exposure to emerging markets' potential. The geographic allocation aligns with a balanced risk profile, providing a mix of growth and stability. Investors seeking to enhance diversification might consider exploring additional geographic regions to capture opportunities in emerging markets while maintaining a balanced approach.
Ongoing product costs
- iShares MSCI World EUR Hedged UCITS ETF (Acc) 0.55%
- Weighted costs total (per year) 0.55%
The portfolio incurs a total expense ratio (TER) of 0.55% from the iShares MSCI World EUR Hedged UCITS ETF. This cost is relatively moderate for a globally diversified ETF, reflecting the expenses associated with managing the fund's broad market exposure and currency hedging. Keeping investment costs low is crucial for maximizing net returns over time. Investors should regularly review the expense ratios of their holdings to ensure they are receiving value for the fees paid. In this case, the TER is reasonable given the portfolio's comprehensive global coverage and risk management features.
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