Cautious Investor Portfolio with Strong Diversification and Moderate Risk Profile Ideal for Long-Term Stability

Report created on Jul 11, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of three ETFs, with a significant allocation to the Vanguard FTSE All-World UCITS ETF. This ETF accounts for nearly 59% of the portfolio, providing broad exposure to global equities. The Vanguard Global Aggregate Bond UCITS ETF makes up about 29%, offering stability and income through bonds. The remaining portion is allocated to the Vanguard FTSE 250 UCITS ETF, focusing on mid-cap UK companies. This mix provides a blend of global equity exposure and bond stability, which is well-suited for a cautious investment approach, aiming to balance growth potential with risk mitigation.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 7.36%. The maximum drawdown of -20.62% indicates the largest peak-to-trough decline, which is relatively moderate for a diversified portfolio. The fact that only 17 days account for 90% of the returns suggests that the portfolio has experienced significant gains during short periods. This performance is indicative of a balanced approach that captures market upswings while maintaining a degree of protection against downturns, aligning well with a cautious investment strategy.

Projection Info

Using a Monte-Carlo simulation, which involves running multiple scenarios to predict future performance, the portfolio shows a 5th percentile end value of -17.7% and a 50th percentile of 87.77%. This suggests a wide range of potential outcomes, with a median expectation of positive returns. The 67th percentile projects a 130.49% increase, indicating potential for substantial growth. With 897 out of 1,000 simulations yielding positive returns, the annualized return across all simulations is 5.34%. This forward-looking analysis reinforces the portfolio's potential to deliver steady growth over time, while remaining aligned with a cautious risk profile.

Asset classes Info

  • Stocks
    69%
  • Bonds
    29%
  • Other
    1%

The asset class distribution in this portfolio is predominantly in stocks, at nearly 69%, followed by bonds at approximately 29%. This allocation reflects a balanced approach, providing growth potential through equities and stability via bonds. The small percentage in other asset classes and cash enhances diversification without significantly impacting the overall risk profile. This mix is suitable for investors looking to achieve a moderate level of risk while maintaining exposure to both growth and income-generating assets. Adjusting the balance between stocks and bonds can further align the portfolio with specific risk preferences.

Sectors Info

  • Technology
    16%
  • Financials
    12%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Health Care
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Energy
    3%
  • Utilities
    2%

The portfolio exhibits a diverse sector allocation, with technology and financial services leading the way. Technology accounts for about 16% and financial services 12%, indicating a focus on sectors with growth potential. Other sectors like consumer cyclicals, industrials, and healthcare also have significant representation, contributing to the portfolio's resilience across different economic conditions. This sector diversification helps mitigate risks associated with any single industry, providing a buffer against sector-specific downturns. Continuously reviewing sector allocations can ensure alignment with changing market dynamics and personal investment goals.

Regions Info

  • North America
    39%
  • Europe Developed
    19%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, comprising nearly 39%, followed by Europe Developed at 19%. This allocation provides exposure to mature markets with strong economic fundamentals. Emerging markets in Asia and other regions have smaller allocations, offering potential for growth but with higher volatility. This geographical diversification helps balance risks associated with regional economic fluctuations. Investors can consider adjusting geographic allocations based on their views on regional growth prospects and risk tolerance, ensuring the portfolio remains aligned with their long-term 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 optimization chart suggests that there is room for optimization by adjusting the balance between risk and return. By moving along the efficient frontier, investors can achieve a riskier or more conservative portfolio. For those seeking higher returns, increasing equity exposure may be beneficial. Conversely, adding more bonds can enhance stability for risk-averse investors. Before optimizing, it's essential to ensure that the portfolio aligns with personal risk tolerance and financial goals. Once this foundation is established, fine-tuning the asset allocation can help achieve the desired risk-return profile.

Ongoing product costs Info

  • Vanguard Global Aggregate Bond UCITS ETF GBP Hedged Accumulation 0.10%
  • Vanguard FTSE 250 UCITS ETF GBP Accumulation 0.51%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.22%

This portfolio benefits from relatively low costs, with a total expense ratio (TER) of 0.22%. The Vanguard Global Aggregate Bond UCITS ETF has the lowest cost at 0.1%, while the Vanguard FTSE 250 UCITS ETF is the highest at 0.51%. Keeping investment costs low is crucial for maximizing net returns over time. Investors should regularly review and compare costs to ensure they are getting the best value for their investments. By focusing on low-cost investment options, the portfolio can enhance its long-term performance, aligning with the goal of achieving steady growth with minimal expense.

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