Balanced and Broadly Diversified Portfolio with Overlapping Assets and High Historic Performance

Report created on Jun 15, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio consists of six ETFs, with the iShares Core S&P 500 UCITS ETF taking up the largest share at 40%. The Amundi Stoxx Europe 600 and Xtrackers MSCI Emerging Markets ETFs follow with 25% and 15%, respectively. The remaining ETFs, including the Amundi Russell 2000, Xtrackers MSCI Europe Small Cap, and Lyxor Core MSCI Japan, make up smaller portions. This composition provides a broad exposure to global markets. Such diversification helps in spreading risk across various regions and sectors. To further optimize, consider evaluating the balance between these ETFs to ensure alignment with financial goals.

Growth Info

Historically, the portfolio has shown strong performance with a CAGR of 13.8%. However, it has also faced a max drawdown of -34.26%, indicating periods of significant decline. This performance suggests that while the portfolio has the potential for high returns, it also carries a level of risk that may not suit all investors. Understanding these metrics is crucial for setting realistic expectations and managing risk. To potentially improve stability, consider strategies that might mitigate such drawdowns, possibly by incorporating more defensive assets.

Projection Info

Using a Monte-Carlo simulation, which tests various future market scenarios, the portfolio shows promising potential. With a hypothetical initial investment, the median outcome is a 268.44% return, while the worst 5% of scenarios still yield a positive 11.08%. This indicates a strong probability of positive returns, yet also highlights the inherent unpredictability of markets. Such simulations are useful for understanding potential outcomes and planning accordingly. To capitalize on this, ensure the portfolio remains adaptable to changing market conditions by regularly reviewing asset allocations.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, accounting for 99.81% of the total allocation. This indicates a focus on growth and capital appreciation, but also introduces higher volatility. A diversified asset class mix can help in balancing growth with stability. While stocks can drive long-term growth, exposure to other asset classes like bonds or commodities might reduce overall risk. Consider exploring options to introduce more asset class diversity to better align with risk tolerance and investment objectives.

Sectors Info

  • Technology
    21%
  • Financials
    17%
  • Industrials
    12%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation is diverse, with technology leading at 21.37%, followed by financial services and industrials. This spread across multiple sectors helps in mitigating sector-specific risks. However, the concentration in technology may expose the portfolio to volatility inherent in that sector. Understanding sector dynamics is vital for managing risk and capitalizing on growth opportunities. To maintain a balanced sector exposure, regularly assess sector performance and adjust allocations to reflect changing economic conditions and personal investment goals.

Regions Info

  • North America
    50%
  • Europe Developed
    30%
  • Asia Emerging
    8%
  • Japan
    5%
  • Asia Developed
    4%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is skewed towards North America at nearly 50%, with Europe Developed and Asia Emerging following. This provides exposure to both developed and emerging markets, balancing stability with growth potential. Geographic diversification can protect against localized economic downturns. However, the heavy North American focus may limit exposure to opportunities in other regions. Consider re-evaluating geographic allocations to ensure a balanced global exposure, aligning with evolving market trends and investment strategies.

Redundant positions Info

  • Amundi Stoxx Europe 600 UCITS ETF C EUR
    Xtrackers MSCI Europe Small Cap UCITS ETF
    High correlation

The portfolio includes some highly correlated assets, particularly the Amundi Stoxx Europe 600 and Xtrackers MSCI Europe Small Cap ETFs. This correlation can reduce diversification benefits, as these assets may move in tandem. Identifying such overlaps is crucial for optimizing portfolio diversification. To enhance diversification, consider replacing or rebalancing these correlated assets with others that have lower correlation, thus potentially reducing risk and improving returns.

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.

Before optimizing, address the overlapping assets that do not contribute to diversification. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. For a riskier portfolio, increase exposure to high-growth assets. For a more conservative approach, consider adding lower-risk assets like bonds. The goal is to align the portfolio with personal risk tolerance and financial goals. Regularly reassess the portfolio's position on the efficient frontier to ensure it remains aligned with evolving market conditions and personal objectives.

Ongoing product costs Info

  • Xtrackers MSCI Europe Small Cap UCITS ETF 0.30%
  • Lyxor Core MSCI Japan (DR) UCITS ETF 0.22%
  • Amundi Stoxx Europe 600 UCITS ETF C EUR 0.07%
  • Amundi Index Solutions - Amundi Russell 2000 ETF-C EUR 0.35%
  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • Xtrackers MSCI Emerging Markets UCITS ETF 1C 0.18%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) stands at 0.15%, which is relatively low, indicating cost-effective management. Keeping investment costs low is crucial for maximizing net returns. Each ETF has varying costs, with the Amundi Stoxx Europe 600 ETF being the most cost-effective at 0.07%. Monitoring these costs ensures that they do not erode potential gains. To maintain cost efficiency, regularly review and compare the expense ratios of current holdings with available alternatives, ensuring alignment with financial goals.

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