A balanced ESG-focused portfolio with strong tech and healthcare exposure

Report created on Feb 23, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed entirely of Exchange Traded Funds (ETFs) with a significant emphasis on ESG (Environmental, Social, and Governance) principles. The largest allocation is to a global ESG ETF, making up 37.5% of the portfolio, followed by a European ESG ETF at 30%. This composition showcases a strong commitment to sustainable investing. However, it is important to note that the portfolio is heavily reliant on equity, which can lead to higher volatility. To enhance stability, consider diversifying into other asset classes like bonds or commodities, which can provide a buffer against market fluctuations.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.99%. This indicates strong growth over time. The maximum drawdown, or the largest decrease from peak to trough, was -18.18%, which is relatively moderate for an equity-heavy portfolio. This performance suggests resilience in market downturns. However, it's essential to remember that past performance does not guarantee future results. Regularly reviewing performance against a relevant benchmark can help ensure that the portfolio continues to meet investment goals.

Projection Info

Using Monte Carlo simulation, which projects potential future outcomes based on historical data, the portfolio shows promising potential. With 1,000 simulations, the median outcome suggests a 553.3% end value, while 998 simulations resulted in positive returns. This indicates a high probability of future growth but also highlights the inherent uncertainty in projections. It's crucial to use these simulations as a guide rather than a guarantee, and to remain adaptable to changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, with no allocation to bonds, cash, or other asset classes. While this can drive growth, it may also lead to increased volatility. Diversification across asset classes can help mitigate risk and provide more consistent returns. Consider introducing fixed-income or alternative investments to balance the equity exposure. This approach can help maintain stability during market downturns and reduce overall portfolio risk.

Sectors Info

  • Technology
    28%
  • Health Care
    22%
  • Financials
    14%
  • Consumer Staples
    10%
  • Industrials
    9%
  • Consumer Discretionary
    7%
  • Telecommunications
    5%
  • Basic Materials
    3%
  • Real Estate
    1%
  • Utilities
    1%

The sector allocation is concentrated in technology (28%) and healthcare (22%), with smaller allocations to financial services, consumer defensive, and other sectors. This concentration can lead to higher volatility, particularly in times of sector-specific downturns. For instance, tech-heavy portfolios might experience increased risk during interest rate hikes. To achieve a more balanced sector exposure, consider diversifying into underrepresented sectors, which can provide additional growth opportunities and reduce sector-specific risks.

Regions Info

  • North America
    50%
  • Europe Developed
    45%
  • Japan
    3%
  • Australasia
    1%

Geographically, the portfolio leans heavily on North America (50%) and Europe Developed (45%), with minimal exposure to other regions. This allocation aligns with common benchmarks but may limit opportunities for growth in emerging markets. Expanding geographic exposure can enhance diversification and reduce regional risk. Consider increasing allocations to underrepresented regions, such as Asia or Latin America, to capture growth potential in these developing markets and reduce reliance on developed economies.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    37%
  • Mid-cap
    16%
  • Small-cap
    1%

The portfolio is predominantly invested in large-cap stocks, with 46% in mega-cap and 37% in big-cap companies. This focus on larger companies can provide stability and lower volatility, as these firms are generally more established. However, it may also limit exposure to the growth potential of smaller companies. To capitalize on diverse market opportunities, consider increasing exposure to small and mid-cap stocks, which can offer higher growth potential while maintaining a balanced risk profile.

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 can potentially be optimized using the Efficient Frontier, a concept that seeks the best possible risk-return ratio based on the current assets. This involves adjusting asset allocations to achieve the most efficient balance between risk and return. While this optimization doesn't guarantee diversification or other specific goals, it can provide a framework for enhancing the portfolio's performance. Regularly reviewing and adjusting allocations can help maintain an optimal risk-return profile.

Ongoing product costs Info

  • iShares MSCI Europe Information Technology Sector UCITS ETF 0.18%
  • iShares S&P 500 USD Information Technology Sector UCITS 0.15%
  • Xtrackers MSCI World Health Care UCITS ETF 1C 0.25%
  • Xtrackers MSCI World Consumer Staples UCITS ETF 1C 0.25%
  • Xtrackers ESG MSCI Europe UCITS 1C 0.20%
  • Xtrackers MSCI World ESG UCITS ETF 1C 0.25%
  • Weighted costs total (per year) 0.22%

The portfolio's total expense ratio (TER) is 0.22%, which is relatively low and supports better long-term performance by minimizing costs. Lower fees can enhance net returns over time, allowing more of the portfolio's growth to benefit the investor. It's important to regularly review and compare the costs of the portfolio's holdings to ensure they remain competitive. Reducing costs where possible can contribute to improved performance and align with the goal of maximizing returns.

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