Balanced global portfolio with strong equity focus and moderate risk profile

Report created on Dec 7, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equity ETFs, with a significant 60% allocation to the Vanguard FTSE All-World UCITS ETF. The rest of the portfolio is diversified across four other ETFs, focusing on different regions and indices. This composition provides a broad exposure to global equities, aligning with a balanced investment approach. The high allocation to a single ETF suggests a strong belief in global market growth, but it also means that the portfolio's performance is closely tied to the overall equity market trends. To enhance diversification, consider incorporating other asset classes, such as bonds or real estate, which could provide stability during market volatility.

Growth Info

Historically, this portfolio has shown robust performance with a compound annual growth rate (CAGR) of 12.37%, indicating strong returns over time. However, it also experienced a maximum drawdown of nearly 34%, highlighting potential volatility. This performance suggests that while the portfolio can deliver substantial growth, it may also be subject to significant fluctuations. Understanding the trade-off between risk and return is crucial for investors. To mitigate potential downturns, consider strategies like rebalancing or diversifying into less correlated asset classes.

Projection Info

The forward projection using Monte Carlo simulation indicates an average annualized return of 13.18% across 1,000 simulations, with a wide range of outcomes. The 5th percentile projects a modest 40.04% return, while the 67th percentile suggests a substantial 534.22% return. This method uses historical data to simulate potential future performance, but it's important to note that past performance doesn't guarantee future results. Investors should use these projections to understand the range of possible outcomes and adjust their risk tolerance and investment strategy accordingly.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, making up nearly 100% of the allocation, with negligible amounts in other asset classes. This heavy equity focus suggests a growth-oriented strategy but also exposes the portfolio to higher volatility. While stocks can offer high returns, they are subject to market fluctuations. Including other asset classes like bonds or commodities could reduce risk and provide more stability, especially during market downturns. A balanced mix of asset classes can enhance the risk-return profile and help achieve more consistent performance.

Sectors Info

  • Technology
    23%
  • Financials
    18%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Energy
    5%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation within the portfolio is diverse, with significant exposure to technology (22.5%), financial services (18.1%), and consumer cyclicals (10.6%). This sectoral diversity can help mitigate risks associated with downturns in any single industry. However, the high concentration in technology may increase vulnerability to sector-specific risks, such as regulatory changes or tech market corrections. To maintain balance, consider periodically reviewing and adjusting sector weights, potentially increasing exposure to underrepresented sectors like utilities or real estate for added stability.

Regions Info

  • North America
    47%
  • Europe Developed
    21%
  • Asia Emerging
    10%
  • Asia Developed
    6%
  • Japan
    4%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America (46.8%), followed by Europe Developed (21%) and Asia Emerging (9.8%). This geographic spread offers a level of diversification across global markets, but the heavy North American focus could increase susceptibility to regional economic downturns. Diversifying further into regions like Latin America or Africa could provide exposure to different economic cycles and growth opportunities. Balancing geographic allocation can help mitigate regional risks and enhance the portfolio's resilience to global market shifts.

Redundant positions Info

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

The portfolio's assets show high correlation, particularly between the Vanguard FTSE All-World UCITS ETF and the Invesco S&P 500 UCITS ETF. This correlation implies that these assets tend to move in tandem, reducing the diversification benefit. High correlation can amplify portfolio volatility during market swings. To improve diversification, consider replacing or reducing exposure to highly correlated assets. Introducing assets with low or negative correlation can help smooth out returns and reduce overall portfolio risk.

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 a high degree of correlation, suggesting that optimization could improve efficiency. By reallocating assets and potentially including less correlated investments, the portfolio could achieve a more favorable balance between risk and return. It's important to note that optimization focuses on maximizing returns for a given level of risk based on current holdings, not necessarily achieving diversification across all asset classes or sectors.

Ongoing product costs Info

  • Amundi Stoxx Europe 600 UCITS ETF C EUR 0.07%
  • Invesco S&P 500 UCITS ETF 0.05%
  • iShares MSCI India UCITS ETF USD Acc 0.65%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Xtrackers MSCI Emerging Markets UCITS ETF 1C 0.18%
  • Weighted costs total (per year) 0.22%

The portfolio's total expense ratio (TER) is 0.22%, which is relatively low, reflecting the cost efficiency of the ETFs included. Lower costs can significantly impact long-term returns, as they reduce the drag on investment performance. Keeping expenses minimal is a key strategy for maximizing net returns. Investors should regularly review the expense ratios of their holdings and consider low-cost alternatives if available. However, it's essential to balance cost considerations with other factors like performance, diversification, and risk.

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