A conservative portfolio with moderate diversification and a focus on global equity ETFs

Report created on Dec 18, 2024

Risk profile Info

2/7
Conservative
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs, with notable allocations in HSBC MSCI World and Xtrackers II EUR Overnight Rate Swap. These two ETFs alone make up over 80% of the portfolio, indicating a strong preference for diversified equity exposure and fixed income stability. The inclusion of Xetra-Gold and a small position in Bitcoin suggests a limited interest in alternative assets. This composition provides a balanced approach to risk, with equities driving growth and fixed income offering stability. To enhance diversification, consider adding other asset types that align with your risk tolerance.

Growth Info

Historically, this portfolio has delivered a compound annual growth rate (CAGR) of 7.88% with a maximum drawdown of -9.57%. This indicates a stable performance with moderate volatility, suitable for conservative investors. The fact that 90% of returns are concentrated in just 18 days highlights the importance of staying invested to capture these gains. While past performance is not a guarantee of future results, it provides a useful benchmark for expected returns and risk. To mitigate drawdowns, consider strategies like rebalancing or adding hedging instruments.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with an annualized return of 16.48% across simulations. The 5th percentile suggests a potential downside, while the 50th and 67th percentiles indicate substantial growth opportunities. Monte Carlo simulations use historical data to model future performance, but they cannot predict market changes or unforeseen events. These projections should be used to understand potential risks and returns, but not as definitive predictions. Consider adjusting your asset allocation based on your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    57%
  • Bonds
    38%
  • Other
    2%

The portfolio is predominantly composed of stocks (57.18%) and bonds (37.70%), with a small allocation to other asset classes like gold and Bitcoin. This mix provides a balanced exposure to growth and income-generating assets. Stocks offer potential for higher returns, while bonds provide stability and income. The limited exposure to alternative assets suggests a conservative approach to diversification. Consider increasing allocations to other asset classes, such as real estate or commodities, to enhance diversification and potentially improve risk-adjusted returns.

Sectors Info

  • Technology
    15%
  • Financials
    9%
  • Consumer Discretionary
    6%
  • Health Care
    6%
  • Industrials
    6%
  • Telecommunications
    5%
  • Consumer Staples
    3%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation is relatively balanced, with technology, financial services, and consumer cyclicals making up the largest portions. This diversification across sectors reduces the risk of being overly exposed to any single industry. However, the portfolio might benefit from a greater emphasis on sectors like healthcare or energy, which can provide defensive characteristics or growth opportunities. Regularly reviewing sector allocations ensures alignment with market trends and personal investment goals. Diversifying sector exposure can help mitigate risks associated with economic cycles or industry-specific downturns.

Regions Info

  • North America
    42%
  • Europe Developed
    8%
  • Japan
    3%
  • Australasia
    1%
  • Asia Developed
    1%
  • Asia Emerging
    1%

Geographically, the portfolio has a strong focus on North America, accounting for over 42% of the allocation, with limited exposure to other regions. This concentration can lead to regional risks, such as economic downturns or political instability in North America. Expanding geographic diversification to include more exposure to Europe, Asia, and emerging markets can reduce risk and capture growth opportunities in different economic environments. Consider rebalancing to achieve a more globally diversified portfolio, aligning with your risk tolerance and investment horizon.

Redundant positions Info

  • HSBC MSCI World UCITS ETF
    Vanguard FTSE All-World UCITS ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the HSBC MSCI World and Vanguard FTSE All-World ETFs. High correlation means these assets tend to move in the same direction, offering limited diversification benefits. Diversification is key to managing risk, and reducing correlated assets can help achieve this. Consider replacing one of these ETFs with an uncorrelated asset to improve diversification. Alternatively, explore other investment strategies that focus on diversification, such as factor-based investing or thematic investing.

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.

Optimizing this portfolio using the Efficient Frontier involves adjusting asset allocations to achieve the best possible risk-return ratio. The current portfolio has overlapping assets that offer little diversification, suggesting room for improvement. By reallocating funds among existing assets or introducing new ones, the portfolio can be positioned closer to the Efficient Frontier. This optimization focuses on maximizing returns for a given level of risk, not necessarily increasing diversification. Regularly reviewing and rebalancing your portfolio ensures alignment with your risk tolerance and financial goals.

Dividends Info

  • HSBC MSCI World UCITS ETF 0.70%
  • Vanguard FTSE All-World UCITS ETF 0.90%
  • Weighted yield (per year) 0.43%

The portfolio's dividend yield is relatively low at 0.43%, with contributions from the HSBC MSCI World and Vanguard FTSE All-World ETFs. Dividends provide a steady income stream, which can be reinvested to enhance returns over time. For income-focused investors, increasing exposure to higher-yielding assets, such as dividend-focused ETFs or bonds, can improve the portfolio's income potential. However, it's important to balance dividend yield with growth potential, as high-yielding assets may not always offer the best long-term returns.

Ongoing product costs Info

  • HSBC MSCI World UCITS ETF 0.15%
  • Vanguard FTSE All-World UCITS ETF 0.22%
  • Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C 0.10%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is 0.13%, indicating low costs associated with the chosen ETFs. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode investment gains over time. Regularly reviewing and comparing the expense ratios of your investments can help identify opportunities to reduce costs. Consider switching to lower-cost alternatives within the same asset class or sector to further improve cost efficiency. Additionally, be mindful of hidden costs, such as transaction fees or taxes, that may impact overall returns.

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