Balanced and Broadly Diversified Portfolio with Strong Historic Performance and Low Costs

Report created on Dec 6, 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 of four Vanguard ETFs, focusing on equities with a heavy allocation to the S&P 500. This composition suggests a balanced approach, with a strong emphasis on diversification across various developed and emerging markets. The allocation is weighted towards large-cap stocks, which are generally considered less volatile than small-cap stocks. The portfolio's composition is suitable for those seeking steady growth while maintaining a level of safety through diversification. It is important to regularly review the allocation to ensure it aligns with the investor's risk tolerance and financial goals.

Growth Info

Historically, this portfolio has performed quite well, with a compound annual growth rate (CAGR) of 14.53%. This indicates robust growth over time, though it did experience a maximum drawdown of -25.55%. Such a drawdown highlights the inherent risks of equity-heavy portfolios, especially during market downturns. Despite this, the portfolio has shown resilience, with the majority of returns occurring in just 18 days. This underlines the importance of staying invested to capture these key return days. Investors should remain patient and committed to their long-term strategy to benefit from potential future gains.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method uses random sampling to predict potential outcomes based on historical data. The results show a 50th percentile end value of 318.69%, with the majority of simulations yielding positive returns. This indicates a strong likelihood of growth, though individual results may vary. The annualized return across all simulations is 12.46%, suggesting continued positive performance. Investors should remain aware of potential market fluctuations and consider rebalancing if projections deviate significantly from their expectations.

Asset classes Info

  • Stocks
    100%

The portfolio is dominated by stocks, accounting for 99.89% of its allocation. This focus on equities aligns with a growth-oriented strategy, offering potential for higher returns but also increased volatility. A small portion is allocated to other asset classes, providing minimal diversification benefits. Investors should consider their risk tolerance and investment horizon when evaluating this allocation. If looking to reduce risk, incorporating more bonds or other fixed-income assets could help stabilize returns. Maintaining a diversified mix of asset classes is key to managing risk and achieving long-term financial goals.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation is diverse, with a strong emphasis on technology, financial services, and healthcare. These sectors are known for their growth potential and have historically driven market performance. However, the portfolio's heavy reliance on tech stocks could increase vulnerability to sector-specific downturns. A balanced sector allocation is crucial for reducing risk and capturing opportunities across different industries. Investors should periodically review sector weightings to ensure they align with market conditions and personal risk preferences. Diversifying across sectors can help mitigate risks and enhance overall portfolio stability.

Regions Info

  • North America
    78%
  • Europe Developed
    9%
  • Asia Emerging
    6%
  • Asia Developed
    2%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America, specifically the US market. While this focus has historically provided strong returns, it also exposes the portfolio to regional risks. A more balanced geographic allocation could help mitigate these risks and capture growth opportunities in other regions. The inclusion of emerging markets offers potential for higher returns, though with increased volatility. Investors should consider their comfort level with geographic exposure and adjust allocations accordingly. A well-diversified geographic mix can help manage risk and enhance long-term performance.

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 this portfolio is already well-diversified and cost-efficient. However, there is room for optimization along the efficient frontier, which represents the best possible risk-return trade-off. To achieve a riskier portfolio, investors could increase their allocation to equities or growth-oriented sectors. Conversely, to adopt a more conservative approach, incorporating more bonds or fixed-income securities could be beneficial. Investors should consider their risk tolerance and financial goals when making adjustments, ensuring that changes align with their long-term strategy and desired outcomes.

Dividends Info

  • Vanguard FTSE 100 UCITS GBP Acc 0.60%
  • Weighted yield (per year) 0.03%

The portfolio's dividend yield is relatively low, at 0.03%, with the Vanguard FTSE 100 UCITS GBP Acc providing a modest 0.6% yield. This suggests a focus on capital appreciation rather than income generation. Investors seeking regular income may need to explore additional income-generating assets, such as dividend-focused ETFs or fixed-income securities. While dividends can contribute to total returns, they should not be the sole focus for growth-oriented portfolios. Balancing capital gains and income generation is key to achieving a well-rounded investment strategy.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE 100 UCITS GBP Acc 0.10%
  • Weighted costs total (per year) 0.05%

The portfolio boasts low costs, with a total expense ratio (TER) of 0.05%. This is advantageous for long-term investors, as lower costs can significantly enhance net returns over time. The Vanguard ETFs included are known for their cost efficiency, making them an attractive choice for cost-conscious investors. Maintaining a focus on low-cost investments can help maximize returns and achieve financial goals more effectively. When evaluating potential additions to the portfolio, prioritizing low-cost options can contribute to overall cost efficiency and improved performance.

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