A balanced portfolio with strong equity focus and significant North American exposure
Report created on Nov 19, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAG - IE00BFMXXD54 51.06% -
VW Vanguard FTSE All-World UCITS ETF USD Accumulation
VWRA - IE00BK5BQT80 48.94%
This portfolio is composed of two main ETFs, with the Vanguard S&P 500 UCITS Acc making up 51% and the Vanguard FTSE All-World UCITS ETF USD Accumulation at 49%. This composition reflects a strong equity focus, with nearly all the assets invested in stocks. The minimal allocation to cash and other assets indicates a strategy aimed at capital appreciation rather than income generation. This structure is relevant as it suggests a growth-oriented approach, leveraging the historical performance of equities. To balance risk, consider incorporating fixed-income assets, which can provide stability during market downturns.
Growth
Historically, the portfolio has demonstrated a commendable compound annual growth rate (CAGR) of 14.33%, with a maximum drawdown of -29.49%. This suggests a robust performance over time, albeit with significant volatility. Understanding these metrics is crucial, as they highlight the potential for high returns as well as the risk of substantial losses. For investors, it's important to be prepared for market fluctuations and to maintain a long-term perspective. Regularly reviewing the portfolio's performance against personal goals can ensure alignment with investment objectives.
Projection
Forward projections using Monte Carlo simulations, which analyze potential future outcomes based on historical data, indicate a wide range of possible returns. With 1,000 simulations, the portfolio's annualized return was 15.14%, and 997 simulations showed positive returns. While these projections offer valuable insights, they are not guarantees, as they rely on past data and assumptions. Investors should use these projections as a guide, but remain flexible to adjust strategies as market conditions evolve. Diversifying further or adjusting allocations can help manage risks associated with uncertain future outcomes.
Asset classes
- Stocks 100%
The portfolio's allocation is heavily skewed towards equities, with 99.97% invested in stocks. This concentration in a single asset class can amplify both potential gains and losses, impacting overall risk. Diversification across different asset classes, such as bonds or real estate, can help mitigate this risk by providing a buffer against market volatility. For those seeking to reduce risk, consider reallocating a portion of the portfolio to include these alternative asset classes, which can also offer income stability through interest or rental yields.
Sectors
- Technology 29%
- Financials 14%
- Health Care 11%
- Consumer Discretionary 10%
- Industrials 9%
- Telecommunications 9%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
The sectoral allocation reveals a significant concentration in technology at 29%, followed by financial services and healthcare. This indicates a strong reliance on these sectors for growth. While these sectors have historically driven performance, overexposure can lead to increased risk if any of these sectors underperform. Diversifying across additional sectors, such as utilities or consumer defensives, can offer more stability and reduce sector-specific risk. Regularly reviewing sector allocations can help maintain a balanced exposure aligned with market trends and personal investment goals.
Regions
- North America 82%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is predominantly exposed to North America, accounting for 82% of the allocation. This heavy concentration suggests a reliance on the economic performance of this region. While North America has been a strong performer historically, geographic diversification can help spread risk and capture growth opportunities in other regions. Increasing exposure to emerging markets or underrepresented regions like Europe or Asia could enhance diversification and potentially improve returns. Monitoring global economic conditions can guide adjustments to geographic allocations.
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 potentially be optimized using the Efficient Frontier, focusing on achieving the best risk-return ratio with the current assets. This involves adjusting the allocation between the existing ETFs to find the most efficient mix. Optimization does not necessarily mean adding new assets, but rather reallocating to improve the portfolio's efficiency. Understanding that efficiency refers to maximizing returns for a given level of risk is crucial. Regularly revisiting the portfolio's allocation can help maintain an optimal balance as market conditions and personal goals evolve.
Ongoing product costs
- Vanguard S&P 500 UCITS Acc 0.07%
- Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
- Weighted costs total (per year) 0.14%
The portfolio's total expense ratio (TER) is relatively low at 0.14%, with individual costs of 0.07% for the S&P 500 ETF and 0.22% for the All-World ETF. Low costs are beneficial as they minimize the drag on returns, allowing more capital to compound over time. Being cost-conscious is essential, as fees can erode returns, especially over long investment horizons. Regularly reviewing and comparing fees with alternative products can ensure that the portfolio remains cost-efficient. Consider switching to lower-cost options if available, without compromising on diversification or performance.
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