A growth-focused portfolio with strong North American exposure and high correlation among large-cap assets

Report created on Dec 30, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of ETFs, with a strong emphasis on large-cap equities. The Vanguard S&P 500 UCITS Acc holds the largest share at 42%, followed by the iShares Core MSCI World UCITS ETF at 24%. This composition is typical for a growth-oriented portfolio, focusing on established markets and companies. While this setup can potentially yield high returns, it may lack diversification across asset classes. A broader mix, including bonds or alternative assets, could help mitigate risk and enhance stability.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.3%. This indicates strong growth potential, especially when compared to typical market benchmarks. However, the maximum drawdown of -35.9% highlights the potential for significant losses during market downturns. While past performance can offer insights, it doesn't guarantee future results. Investors should be prepared for volatility and consider strategies to manage risk, such as diversifying into less volatile assets.

Projection Info

The forward projection, based on Monte Carlo simulations, suggests a wide range of potential outcomes. Monte Carlo analysis uses historical data to estimate future performance by simulating numerous scenarios. The portfolio's 50th percentile projection is a 295.7% return, with a high likelihood of positive returns across simulations. However, the 5th percentile indicates a potential 11.86% return, showing the range of possible outcomes. While these projections offer useful insights, they rely on historical data, which may not account for future market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, making up 99.8% of the allocation. This concentration in equities aligns with growth objectives but may expose the portfolio to higher volatility. A more balanced approach, incorporating other asset classes like bonds or real estate, could reduce risk and provide more stable returns. Comparing to typical benchmarks, which often include a mix of asset classes, the portfolio could benefit from greater diversification to better withstand market fluctuations.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Consumer Discretionary
    12%
  • Industrials
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation shows a significant concentration in Technology at 25.5%, followed by Financial Services and Consumer Cyclicals. This mirrors common growth-oriented strategies but may lead to higher volatility, especially during economic shifts impacting these sectors. While the diversification across 11 sectors is beneficial, the heavy reliance on tech could be risky during periods of regulatory changes or interest rate hikes. Balancing exposure across sectors could enhance stability and capitalize on emerging trends in other industries.

Regions Info

  • North America
    79%
  • Asia Emerging
    6%
  • Europe Developed
    5%
  • Asia Developed
    4%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America, accounting for 79.4% of the allocation. While this aligns with the strong performance of U.S. markets, it limits exposure to other regions that might offer growth opportunities. The underrepresentation of regions like Europe and Asia could mean missed potential gains. A more geographically balanced approach could enhance diversification, reduce regional risks, and capture growth in emerging markets, aligning more closely with global benchmarks.

Redundant positions Info

  • iShares Core MSCI World UCITS ETF USD (Acc)
    Vanguard S&P 500 UCITS Acc
    High correlation

The portfolio contains highly correlated assets, particularly between the iShares Core MSCI World UCITS ETF and the Vanguard S&P 500 UCITS Acc. High correlation means these assets tend to move together, which can reduce the diversification benefits and increase risk during downturns. To improve diversification, consider replacing some of these correlated assets with those that have a lower correlation to the rest of the portfolio, thereby enhancing overall risk management and potential 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.

The portfolio could benefit from optimization using the Efficient Frontier, which aims to maximize returns for a given level of risk by adjusting asset weights. However, before optimizing, it's crucial to address the high correlation between certain assets, as this can skew the results. Once diversification is improved, applying Efficient Frontier principles can help achieve a more optimal risk-return balance, ensuring that the portfolio is not only focused on growth but also well-positioned to manage risk effectively.

Ongoing product costs Info

  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc 0.30%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • iShares MSCI World Small Cap UCITS ETF USD (Acc) 0.35%
  • Weighted costs total (per year) 0.17%

The portfolio's total expense ratio (TER) is 0.17%, which is impressively low and supports better long-term returns by minimizing costs. This is a positive alignment with best practices, as lower costs can significantly enhance net returns over time. While the costs are well-managed, it's always beneficial to periodically review them to ensure they remain competitive. Investors should remain vigilant about any fee changes and consider low-cost alternatives if available.

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