A balanced portfolio with high global equity exposure and low diversification benefits

Report created on Jan 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of two ETFs: SPDR® MSCI World UCITS ETF and Vanguard FTSE All-World UCITS ETF, with nearly equal weightings. This composition reflects a heavy emphasis on global equities, which is typical for balanced portfolios seeking growth. However, the reliance on just two ETFs may limit diversification benefits. In comparison to common benchmark compositions, this portfolio is less diversified across asset classes. To enhance diversification, consider incorporating additional asset classes, such as bonds or alternative investments, which may help mitigate risk and improve stability.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.08%. This indicates strong growth over time, outperforming many traditional benchmarks. However, it's essential to note the maximum drawdown of -33.55%, highlighting potential volatility during market downturns. While past performance is promising, it does not guarantee future results. To better manage risk, consider strategies such as dollar-cost averaging or rebalancing the portfolio periodically, ensuring alignment with your risk tolerance and investment goals.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 439.34% over the investment horizon. This method uses historical data to simulate future performance but cannot predict exact outcomes. While the projections are optimistic, with 997 out of 1,000 simulations showing positive returns, it's important to remain cautious. To prepare for various scenarios, consider maintaining an emergency fund and diversifying across asset classes to cushion against unexpected market events.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising 99.94% of the total allocation. This concentration aligns with a growth-focused strategy but limits diversification benefits typically offered by a mix of asset classes. Compared to benchmark norms, this allocation is less diversified, potentially increasing risk. Consider introducing other asset classes, such as fixed income or real estate, to balance the risk-return profile. This broader diversification can help reduce volatility and provide more consistent returns over time.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation shows a significant concentration in technology (26.16%), followed by financial services and healthcare. This distribution aligns with common market trends but may expose the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. Compared to benchmarks, the sector composition is relatively balanced. However, to mitigate potential sector volatility, consider adjusting allocations to underrepresented sectors. This can enhance diversification and reduce reliance on specific industries, thereby stabilizing returns.

Regions Info

  • North America
    71%
  • Europe Developed
    15%
  • Japan
    6%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily skewed towards North America (71.19%), with limited exposure to other regions. While this provides stability through established markets, it may limit growth potential from emerging markets. Compared to common benchmarks, this geographic allocation lacks diversification. To optimize risk and return, consider increasing exposure to underrepresented regions, such as Asia or Latin America. This broader geographic diversification can capture growth opportunities in developing economies and enhance overall portfolio resilience.

Redundant positions Info

  • SPDR® MSCI World UCITS ETF
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    High correlation

The portfolio's assets are highly correlated, as both ETFs track similar indices. This correlation limits diversification benefits, as the assets tend to move together during market fluctuations. In periods of market stress, this lack of diversification can amplify losses. To achieve better risk management, consider adding low-correlation assets that move independently of current holdings. This can enhance portfolio stability and reduce overall risk, providing a more balanced investment approach.

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 seeks the best risk-return ratio. However, the current asset overlap limits diversification, a key component of this optimization. To achieve efficiency, consider reallocating to include non-correlated assets. This adjustment can improve the risk-return profile, aligning with investment goals. Remember, optimization is based on historical data and assumptions, and while it enhances risk management, it doesn't guarantee specific outcomes.

Ongoing product costs Info

  • SPDR® MSCI World UCITS ETF 0.12%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.17%

The portfolio's total expense ratio (TER) is 0.17%, which is impressively low. Low costs are advantageous as they enhance net returns over time, aligning with best practices for cost-efficient investing. Compared to industry averages, this TER is competitive, supporting better long-term performance. While current costs are favorable, periodically reviewing and comparing fees against alternatives can ensure continued cost efficiency. This vigilance helps maintain a cost-effective investment strategy, maximizing potential returns.

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