Moderately Diversified Growth Portfolio with Balanced Risk and Strong Historic Performance

Report created on Nov 22, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of four main ETFs, with a significant allocation towards equities, making up 85% of the portfolio. The Vanguard S&P 500 UCITS Acc holds the largest share at 50%, followed by the Vanguard FTSE All-World UCITS ETF at 20%. The iShares Core MSCI Europe UCITS ETF and WisdomTree Physical Bitcoin ETF each hold 15%. This mix of assets suggests a focus on growth, as equities are typically more volatile but offer higher potential returns. The inclusion of Bitcoin adds an alternative asset class, which can increase volatility but also provide diversification benefits.

Growth Info

Historically, this portfolio has delivered a solid performance with a compound annual growth rate (CAGR) of 12.43%. The maximum drawdown, or the largest peak-to-trough decline, was -17.88%, indicating a moderate level of risk. The portfolio's returns are concentrated within a small number of days, with 90% of returns occurring on just 13 days. This suggests that the portfolio is sensitive to market timing, and missing out on these key days could significantly impact overall returns. Regular monitoring and a long-term investment strategy could help mitigate this risk.

Projection Info

A Monte Carlo simulation, which uses random sampling to model potential future returns, was conducted with 1,000 simulations. The results show a 50th percentile return of 47.93% and a 67th percentile return of 175.51%, with 600 simulations yielding positive returns. The annualized return across all simulations is 11.93%. While these projections suggest a strong potential for growth, the 5th percentile indicates a possible loss of 89.71%, highlighting the inherent risks. This simulation underscores the importance of maintaining a diversified and balanced portfolio to manage potential volatility.

Asset classes Info

  • Stocks
    85%
  • Other
    15%

The portfolio is heavily weighted towards stocks, comprising approximately 85% of the total allocation. This indicates a focus on capital appreciation and growth potential. The remaining 15% is allocated to alternative investments, specifically Bitcoin, which adds a layer of diversification. While this asset class can be highly volatile, it may offer significant upside potential. The negligible allocation to bonds and cash suggests a lower emphasis on income generation and capital preservation. To reduce risk, consider increasing exposure to more stable asset classes, such as bonds, which can provide a buffer during market downturns.

Sectors Info

  • Technology
    23%
  • Financials
    13%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation shows a strong emphasis on technology, which makes up nearly 23% of the portfolio. Financial services and healthcare follow, with 12.56% and 10.12% respectively. This allocation aligns with a growth-oriented strategy, as these sectors have historically shown robust performance. However, the concentration in technology may increase sector-specific risk. To enhance diversification, consider adjusting the allocation to include a broader range of sectors. This can help mitigate the impact of sector-specific downturns and provide a more balanced growth potential across different economic cycles.

Regions Info

  • North America
    63%
  • Europe Developed
    18%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily skewed towards North America, which accounts for 62.74% of the allocation. Europe Developed follows with 18.15%, while other regions like Asia Emerging, Japan, and Australasia have minimal representation. This concentration in North America reflects a reliance on the performance of the US market, which can be both a strength and a vulnerability. To achieve greater geographical diversification, consider increasing exposure to underrepresented regions. This can help reduce the portfolio's sensitivity to economic and political events in any single region, potentially enhancing overall stability.

Redundant positions Info

  • Vanguard S&P 500 UCITS Acc
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    High correlation

The portfolio shows high correlation between the Vanguard S&P 500 UCITS Acc and the Vanguard FTSE All-World UCITS ETF. This indicates that these assets tend to move in the same direction, which can amplify portfolio risk during market downturns. While diversification is present, the correlation suggests that the overall risk reduction benefits may be limited. To improve risk management, consider incorporating assets with lower correlations to each other. This can help smooth out returns and reduce the impact of market volatility, leading to a more resilient portfolio over time.

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's current composition suggests it may not be fully optimized due to overlapping, highly correlated assets. The efficient frontier concept highlights the trade-off between risk and return, aiming for the highest expected return for a given level of risk. While the portfolio's growth orientation aligns with its risk profile, the high correlation between some assets may limit its efficiency. Consider exploring options to reduce correlation and enhance diversification, potentially improving the risk-return balance. This could involve reallocating to less correlated assets, while maintaining the overall growth objective.

Ongoing product costs Info

  • iShares Core MSCI Europe UCITS ETF EUR (Acc) 0.20%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, which is relatively low and indicates cost-effective management. The Vanguard S&P 500 UCITS Acc, with a TER of 0.07%, is particularly cost-efficient. Keeping investment costs low is crucial for maximizing net returns over time. While the current cost structure is favorable, it's important to periodically review and compare fees with other available options. This ensures that the portfolio remains competitive and that costs don't erode potential returns. Consider maintaining a focus on low-cost investments to enhance long-term growth potential.

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