Balanced Portfolio with High U.S. Exposure and Strong Tech Focus Offers Growth Potential but Needs Risk Assessment

Report created on Dec 4, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of four ETFs, with a significant allocation to the Invesco FTSE RAFI All World 3000 UCITS ETF and Vanguard S&P 500 UCITS Acc, each holding 40%. The remaining 20% is split between iShares NASDAQ 100 UCITS ETF USD (Acc) and iShares S&P 500 USD Information Technology Sector UCITS. This composition suggests a strong focus on broad market exposure with a tilt towards technology. While the portfolio is broadly diversified across sectors, the heavy weighting in U.S. equities, particularly tech, indicates a growth-oriented strategy. It's important to monitor sector concentrations to ensure alignment with risk tolerance and goals.

Growth Info

Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 16.15%. However, it has experienced a maximum drawdown of -26.75%, reflecting its vulnerability during market downturns. The concentration of returns over just 25 days indicates that a few high-return days significantly impact overall performance. This highlights the importance of staying invested long-term to capture these gains. While past performance is not indicative of future results, maintaining a diversified strategy can help mitigate risk while capitalizing on growth opportunities.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. Assuming a hypothetical initial investment, the results show a wide range of potential outcomes, with a 5th percentile return of 209.54% and a 67th percentile of 1,464.85%. The median return stands at 1,054.03%, indicating strong potential for growth. Almost all simulations yielded positive returns, with an average annualized return of 20.82%. While this suggests a promising outlook, it's crucial to remember that these projections are based on historical data and assumptions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with a negligible allocation to bonds, cash, and other asset classes. This high equity exposure aligns with a growth-oriented strategy but also introduces higher volatility. Stocks tend to offer higher returns over the long term but come with increased risk. To balance risk and reward, consider diversifying into fixed-income securities or other asset classes. This can help stabilize returns during market fluctuations and provide a more consistent income stream.

Sectors Info

  • Technology
    33%
  • Financials
    15%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Telecommunications
    8%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is heavily skewed towards technology, accounting for over 32% of the portfolio. Other significant sectors include financial services, consumer cyclicals, and healthcare. While the tech focus has driven strong past performance, it also increases vulnerability to sector-specific risks. Diversifying across more sectors can reduce the impact of adverse events in any single industry. Regularly reviewing sector allocation ensures that the portfolio remains aligned with broader market trends and personal investment objectives.

Regions Info

  • North America
    72%
  • Europe Developed
    9%
  • Japan
    3%
  • Asia Emerging
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, with over 71% exposure, followed by Europe Developed and Japan. This concentration in North American markets, particularly the U.S., has contributed to strong historical returns but also exposes the portfolio to regional economic risks. Diversifying further across global markets can mitigate these risks and capture growth opportunities in emerging economies. A balanced geographic allocation can provide stability and enhance long-term performance.

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 optimization chart suggests potential for improvement by adjusting the risk-return balance. Moving along the efficient frontier can help achieve a more risk-adjusted portfolio. For a riskier approach, consider increasing the equity allocation, while a more conservative stance could involve adding fixed-income assets. Before optimizing, ensure alignment with financial goals and risk tolerance. Focus on maintaining diversification, minimizing costs, and periodically reviewing the portfolio's performance and allocation to stay on track with investment objectives.

Ongoing product costs Info

  • iShares NASDAQ 100 UCITS ETF USD (Acc) 0.36%
  • iShares S&P 500 USD Information Technology Sector UCITS 0.15%
  • Invesco FTSE RAFI All World 3000 UCITS ETF 0.39%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.24%

The total expense ratio (TER) of the portfolio is 0.24%, which is relatively low, reflecting the cost-efficiency of the ETF structure. Lower costs can significantly impact net returns over time, enhancing overall performance. It's important to remain vigilant about fees, as they can erode returns, especially in a low-yield environment. Regularly reviewing and comparing the expense ratios of existing holdings and potential new investments can help maintain cost-effectiveness in the portfolio.

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