Balanced Portfolio with Strong Tech Focus and High Historic Performance but Needs Diversification

Report created on Nov 26, 2024

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 dominated by two ETFs: iShares MSCI World ETF at 83.33% and Invesco NASDAQ 100 ETF at 16.67%. This composition results in exposure to a broad range of global stocks, with a heavy emphasis on developed markets. However, the lack of diversification across asset classes could pose a risk in times of market volatility. While ETFs offer built-in diversification, relying heavily on just two can limit the portfolio's ability to weather different market conditions. To enhance stability, consider incorporating other asset classes like bonds or real estate.

Growth Info

Historically, the portfolio has performed well, boasting a CAGR of 13.87%. This impressive growth rate suggests strong past performance, especially given the portfolio's focus on large-cap and tech-heavy indices. However, the maximum drawdown of -27.43% indicates significant volatility during market downturns. While past performance is not indicative of future results, it highlights the portfolio's potential for high returns and risk. To mitigate potential drawdowns, consider diversifying into more conservative investments that can act as a buffer during market corrections.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, the portfolio shows promising future potential. The median projection indicates a 565.15% increase in the portfolio's value, with an annualized return of 15.81%. This simulation, which uses random sampling to predict future performance, suggests a high likelihood of positive returns. However, the range of outcomes also underscores the inherent uncertainty in investing. To improve the likelihood of achieving favorable outcomes, consider adjusting the portfolio's risk profile to better align with personal risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising 99.64% of the total allocation. This focus on equities can drive growth, but it also increases exposure to market volatility. While stocks can offer substantial returns, they are also subject to fluctuations that can impact overall performance. To create a more balanced portfolio, consider diversifying into other asset classes such as bonds, which can provide stability and income, or alternative investments that may offer different risk-return profiles.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio's sector allocation is heavily skewed towards technology, which accounts for nearly 31%. This concentration can lead to significant growth during tech booms but also exposes the portfolio to sector-specific risks. Other sectors like financial services, consumer cyclicals, and healthcare provide some diversification but are less prominent. To reduce sector risk, consider redistributing some investments into underrepresented sectors, ensuring a more balanced approach that can better withstand market fluctuations across different industries.

Regions Info

  • North America
    80%
  • Europe Developed
    13%
  • Japan
    4%
  • Australasia
    2%
  • Asien
    1%

Geographically, the portfolio is predominantly invested in North America, with 80.14% allocation. This provides exposure to a stable and mature market but limits diversification across other regions. While North American markets have historically performed well, concentrating investments in one region can increase vulnerability to local economic and political events. To enhance geographic diversification, consider increasing exposure to emerging markets or other developed regions, which can offer growth opportunities and reduce reliance on a single economic area.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    iShares MSCI World ETF
    High correlation

The assets in the portfolio are highly correlated, particularly between the Invesco NASDAQ 100 ETF and the iShares MSCI World ETF. This high correlation means these assets tend to move in the same direction, which can amplify portfolio volatility during market swings. While correlated assets can indicate strong performance during uptrends, they offer limited diversification benefits. To improve the portfolio's resilience, consider incorporating less correlated assets, which can help stabilize returns and reduce overall risk.

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 the portfolio, it's crucial to address the high correlation between assets, as they provide limited diversification benefits. By reducing overlap, the portfolio can improve its risk-return profile. Moving along the efficient frontier can help achieve a riskier or more conservative stance. For a riskier portfolio, consider increasing allocation to growth-oriented assets. For a more conservative approach, increase exposure to bonds or other low-risk investments. Focus on aligning the portfolio with personal risk tolerance and investment goals before making adjustments.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • iShares MSCI World ETF 1.40%
  • Weighted yield (per year) 1.27%

The portfolio has a modest dividend yield of 1.27%, with the iShares MSCI World ETF contributing 1.4% and the Invesco NASDAQ 100 ETF offering 0.6%. While dividends can provide a steady income stream, the current yield is relatively low compared to other income-focused investments. For investors seeking higher income, exploring options with greater dividend potential might be beneficial. However, it's essential to balance the desire for income with the need for growth and diversification in the overall portfolio strategy.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • iShares MSCI World ETF 0.24%
  • Weighted costs total (per year) 0.22%

The portfolio's total expense ratio (TER) is 0.22%, with the Invesco NASDAQ 100 ETF at 0.15% and the iShares MSCI World ETF at 0.24%. This cost structure is relatively low, which is favorable for long-term growth, as lower fees mean more of the investment returns are retained. Keeping investment costs low is crucial for maximizing net returns over time. While the current expense ratio is competitive, always be on the lookout for opportunities to reduce costs further, such as by comparing similar investment options or negotiating fees.

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