Balanced Portfolio with Strong Technology Focus and High Correlation Among Assets

Report created on Jun 14, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed entirely of ETFs, with a significant allocation to the Vanguard FTSE All-World UCITS ETF, making up 50% of the total. This suggests a focus on broad market exposure. The Vanguard S&P 500 UCITS ETF is also a major component, accounting for 25% of the portfolio. This allocation indicates a strong emphasis on U.S. equities. The remaining holdings are spread across a few other ETFs, including a small allocation to a sector-specific ETF in semiconductors. Overall, the portfolio shows a balanced approach with a tilt towards global and U.S. markets.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 15.74%. This impressive growth reflects the strong performance of global equities in recent years. However, it's important to note the maximum drawdown of -18.06%, which highlights the potential volatility and risk associated with equity-heavy portfolios. The concentration of returns in just 26 days indicates that a significant portion of gains occurred in a short period, emphasizing the importance of staying invested during market fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method helps estimate potential outcomes by simulating various market scenarios. The results show an annualized return of 19.27%, with a wide range of possible end values. The 5th percentile suggests a potential increase of 182.31%, while the 50th percentile forecasts an 877.22% increase. Notably, all simulations resulted in positive returns, indicating a favorable outlook, though actual outcomes may vary.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.94% of assets allocated to equities. This high concentration in a single asset class suggests a focus on growth and capital appreciation. While equities offer significant return potential, they also come with higher volatility and risk. The minimal allocation to other asset classes, such as bonds or cash, indicates limited diversification across different types of investments. To reduce risk, consider introducing more diverse asset classes into the portfolio.

Sectors Info

  • Technology
    31%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation reveals a strong focus on technology, which comprises 31.03% of the portfolio. This concentration reflects a bet on the continued growth of the tech industry. Other sectors, such as financial services and healthcare, also have significant representation. While sector diversity is present, the heavy tech weighting may expose the portfolio to sector-specific risks. Balancing exposure across more sectors could enhance diversification and reduce vulnerability to fluctuations in any single industry.

Regions Info

  • North America
    75%
  • Europe Developed
    11%
  • Japan
    4%
  • Asia Emerging
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with 74.57% of assets allocated to this region. This substantial allocation indicates a reliance on the performance of U.S. and Canadian markets. While there is some exposure to Europe, Japan, and emerging markets, the geographic concentration may limit the benefits of international diversification. To mitigate region-specific risks, consider increasing exposure to other global markets, which could provide more balanced geographic diversification.

Redundant positions Info

  • iShares Core MSCI World UCITS ETF USD (Acc)
    Vanguard S&P 500 UCITS ETF
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    Vanguard FTSE All-World UCITS ETF
    High correlation

The portfolio contains several highly correlated assets, particularly among the Vanguard and iShares ETFs. These correlations suggest that these assets tend to move in similar directions, which may reduce the diversification benefits within the portfolio. While some level of correlation is expected in a broadly diversified portfolio, too much overlap can limit risk reduction. Reviewing and potentially adjusting the allocation to reduce redundancy and enhance diversification could be beneficial.

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.

Currently, the portfolio could benefit from optimization by addressing the high correlation among its assets. Reducing redundancy in holdings can enhance diversification benefits. By moving along the efficient frontier, the portfolio can be adjusted to achieve a more conservative or riskier profile, depending on the investor's goals. Before making changes, it's crucial to evaluate the desired risk-return balance. Once overlaps are minimized, further optimization can be pursued to align with the investor's risk appetite and financial objectives.

Dividends Info

  • Vanguard FTSE All-World UCITS ETF 1.20%
  • Vanguard S&P 500 UCITS ETF 0.80%
  • Weighted yield (per year) 0.80%

The portfolio's dividend yield stands at 0.8%, primarily driven by the Vanguard FTSE All-World UCITS ETF and the Vanguard S&P 500 UCITS ETF. This yield is relatively modest, reflecting the focus on growth-oriented equities rather than income generation. While reinvesting dividends can contribute to long-term growth, the portfolio may not be ideal for investors seeking regular income. If income is a priority, consider exploring additional income-focused investments to complement the current holdings.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • Vanguard FTSE All-World UCITS ETF 0.22%
  • Vanguard S&P 500 UCITS ETF 0.07%
  • VanEck Semiconductor UCITS ETF 0.35%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.19%

The portfolio's total expense ratio (TER) is 0.19%, which is quite competitive and reflects the low-cost nature of the chosen ETFs. This low-cost structure is advantageous, as it helps maximize net returns by minimizing the impact of fees. It's essential to remain mindful of investment costs, as they can erode returns over time. Continuously monitoring and managing expenses will ensure the portfolio remains cost-effective, supporting long-term investment success.

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