A conservative ETF portfolio with a strong focus on stability and moderate global exposure

Report created on Dec 16, 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

This portfolio is heavily weighted towards ETFs, with a significant 50.5% allocation to the Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C. The remainder is spread across various equity-focused ETFs, including a notable 10% in physical gold, which adds a layer of safety. Such a composition suggests a conservative approach, aiming for stability and modest growth. The allocation to gold and bonds can act as a buffer against market volatility. However, the portfolio could benefit from a more diversified approach to equities to enhance growth potential. Consider reviewing the allocation to ensure it aligns with long-term financial goals and risk tolerance.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 7.91%, with a maximum drawdown of -6.99%. This demonstrates a relatively stable performance, which aligns with its conservative risk classification. Such a performance is reassuring for risk-averse investors who prioritize capital preservation over aggressive growth. However, past performance is not always indicative of future results, as market conditions can change. It's important to regularly review performance and adjust allocations as needed to maintain alignment with your financial objectives and risk tolerance.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, indicates a broad range of potential results. With 1,000 simulations, the portfolio's annualized return is projected at 12.75%, with a 50th percentile end value of 386.9%. While the simulation provides insights into possible future performance, it relies on historical trends, which may not account for unforeseen market shifts. It's crucial to use these projections as a guide rather than a guarantee, and to remain flexible and responsive to changing market conditions. Regularly reassessing your portfolio strategy will help in adapting to new economic realities.

Asset classes Info

  • Bonds
    49%
  • Stocks
    39%
  • Other
    12%

The asset allocation includes 49.2% in bonds, 39.4% in stocks, and 12.1% in other assets, which mainly consists of gold. This mix is typical for a conservative investor seeking capital preservation with some growth potential. Bonds provide stability and income, while equities offer growth opportunities. The inclusion of gold helps hedge against inflation and currency fluctuations. However, a more balanced allocation across asset classes could enhance diversification. Consider increasing the equity exposure to boost potential returns while maintaining a comfortable risk level. Regularly review your asset mix to ensure it aligns with your investment objectives.

Sectors Info

  • Technology
    14%
  • Health Care
    7%
  • Financials
    4%
  • Consumer Discretionary
    3%
  • Industrials
    3%
  • Telecommunications
    2%
  • Consumer Staples
    2%
  • Energy
    1%
  • Real Estate
    1%
  • Basic Materials
    1%
  • Utilities
    1%

Sector allocation shows a concentration in technology (14.4%) and healthcare (7%), with smaller allocations in financial services and consumer cyclicals. This suggests a focus on sectors with strong growth potential. However, the portfolio lacks significant exposure to other sectors, which could limit diversification benefits. A more balanced sectoral allocation could reduce sector-specific risks and enhance portfolio resilience. Consider diversifying into underrepresented sectors to capture broader market opportunities. Regularly monitor sector performance and adjust allocations to maintain a balanced and diversified portfolio that aligns with your investment strategy.

Regions Info

  • North America
    36%
  • Europe Developed
    3%
  • Japan
    1%

Geographically, the portfolio is heavily weighted towards North America (35.7%), with minimal exposure to other regions. This lack of geographic diversification could expose the portfolio to region-specific risks and limit opportunities in emerging markets. A more globally diversified portfolio can help mitigate such risks and capture growth potential across different economic environments. Consider increasing exposure to regions like Europe, Asia, and emerging markets to enhance diversification. Regularly assess geographic allocations to ensure they align with your risk tolerance and investment goals, and adjust as needed to capture global market opportunities.

Redundant positions Info

  • Vanguard S&P 500 UCITS Acc
    db x-trackers MSCI World Index UCITS DR 1C
    Xtrackers MSCI USA UCITS ETF 1C
    High correlation
  • Xtrackers Russell 2000 UCITS ETF 1C
    SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc EUR
    High correlation

The portfolio contains several highly correlated assets, particularly among U.S.-focused ETFs, which may limit diversification benefits. When assets move in tandem, the portfolio becomes more susceptible to market swings, reducing its ability to cushion against volatility. Diversifying across less correlated assets can enhance risk management and improve the portfolio's resilience. Consider reducing exposure to overlapping assets and exploring alternatives that offer lower correlation. Regularly review asset correlations to ensure your portfolio remains well-diversified and aligned with your risk profile and investment objectives.

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 be optimized for a better risk-return ratio using the Efficient Frontier concept. This involves adjusting the current asset allocation to achieve the best possible balance between risk and return. However, optimization doesn't necessarily mean adding new assets but rather reallocating existing ones. The focus should be on maximizing returns for the given level of risk, not just increasing diversification. Consider using optimization tools to explore different allocation scenarios and identify potential improvements. Regularly reassess your portfolio's efficiency to ensure it remains aligned with your financial goals and risk tolerance.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Xtrackers MSCI USA UCITS ETF 1C 0.12%
  • db x-trackers MSCI World Index UCITS DR 1C 0.17%
  • Xtrackers MSCI World Health Care UCITS ETF 1C 0.25%
  • Xtrackers MSCI World Information Technology UCITS ETF 1C 0.25%
  • Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C 0.10%
  • Xtrackers Russell 2000 UCITS ETF 1C 0.30%
  • SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc EUR 0.30%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, which is relatively low and beneficial for long-term returns. Lower costs mean more of your investment's returns are retained, which can significantly impact compounding over time. However, some ETFs have higher individual costs, which could be optimized. Regularly review and compare the expense ratios of your holdings to identify potential savings. Consider reallocating to lower-cost alternatives if they align with your investment strategy and objectives. Keeping costs in check is essential for maximizing long-term portfolio performance.

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