A cautious and diversified portfolio with emphasis on income and global equity exposure

Report created on Jun 9, 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 a balanced mix of equity and bond ETFs, with an 80% allocation to stocks and 20% to bonds. The portfolio includes seven different ETFs, ensuring a broad diversification across different markets and asset types. Compared to a typical cautious portfolio, this one leans slightly more towards equities, which can offer higher growth potential but also increased volatility. The inclusion of government bonds helps to counterbalance this risk, providing a safety net during market downturns. For a cautious investor, maintaining this mix can help achieve steady growth while managing risk effectively.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 7.66%, which is respectable for a cautious risk profile. The maximum drawdown of -29.55% indicates that the portfolio has experienced significant declines during market downturns, though it has been able to recover over time. Compared to benchmarks, this performance suggests a solid balance between risk and return. While past performance is not a guarantee of future results, it provides a useful context for understanding the portfolio's resilience and growth potential in different market conditions.

Projection Info

Using Monte Carlo simulations, which involve running numerous hypothetical scenarios based on historical data, the portfolio's future performance is projected. The simulations show a median potential growth of 161.6% with an 8.45% annualized return. These projections are not predictions but rather estimates of possible outcomes, highlighting the portfolio's potential for growth. However, the 5th percentile projection of -2.9% also underscores the inherent uncertainties and risks. This information can guide decision-making, helping investors understand the range of possible future scenarios.

Asset classes Info

  • Stocks
    80%
  • Bonds
    20%

The portfolio's asset allocation includes 80% in stocks and 20% in bonds, which aligns with a cautious investor's strategy to balance growth and stability. This mix ensures exposure to the growth potential of equities while the bonds provide a buffer against market volatility. Compared to typical benchmarks, this allocation is well-structured to offer diversification benefits. For cautious investors, maintaining this balance can help manage risk while still allowing for potential capital appreciation over the long term.

Sectors Info

  • Financials
    23%
  • Technology
    14%
  • Consumer Discretionary
    8%
  • Industrials
    7%
  • Telecommunications
    5%
  • Health Care
    5%
  • Basic Materials
    4%
  • Consumer Staples
    4%
  • Utilities
    3%
  • Real Estate
    3%
  • Energy
    3%

Sector allocation is diverse, with financial services and technology sectors taking the lead at 23% and 14% respectively. This distribution aligns well with global benchmarks, ensuring broad exposure to various economic segments. A noteworthy aspect is the significant weighting in financial services, which can be sensitive to interest rate changes. However, the broad sector diversification helps mitigate risks associated with sector-specific downturns. Keeping an eye on sector trends and adjusting allocations as needed can enhance the portfolio's resilience and growth potential.

Regions Info

  • North America
    30%
  • Europe Developed
    21%
  • Asia Developed
    9%
  • Asia Emerging
    8%
  • Japan
    5%
  • Australasia
    4%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is well-diversified with significant exposure to North America at 30% and Europe Developed at 21%. This aligns with global benchmarks, providing a balanced mix of developed and emerging markets. The allocation ensures that the portfolio benefits from the stability of developed markets while capturing growth opportunities in emerging regions. However, the relatively low exposure to Latin America and Africa/Middle East might limit diversification. Consider increasing allocations in underrepresented regions to enhance global diversification further.

Market capitalization Info

  • Large-cap
    29%
  • Mega-cap
    28%
  • Mid-cap
    19%
  • Small-cap
    3%

The portfolio's market capitalization distribution is primarily focused on large-cap stocks, with 29% in big caps and 28% in mega caps. This focus provides stability and lower volatility, as large-cap companies are generally more established. Medium caps at 19% add a growth element, while the minimal allocation to small caps at 3% reduces potential volatility. This balanced approach aligns well with a cautious investment strategy, offering a mix of stability and growth. Consider maintaining this balance to ensure consistent returns while managing risk.

Redundant positions Info

  • iShares Core S&P 500 UCITS ETF USD (Dist)
    Fidelity UCITS SICAV - Fidelity US Quality Income UCITS ETF
    High correlation

The portfolio includes some highly correlated assets, particularly between the iShares Core S&P 500 and Fidelity US Quality Income ETFs. High correlation means these assets tend to move together, which can limit diversification benefits during market downturns. While this alignment can enhance returns during upswings, it may increase risk when markets decline. To improve diversification, consider reducing exposure to one of these correlated assets or adding uncorrelated assets to the portfolio, thereby enhancing risk management.

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 could benefit from optimization using the Efficient Frontier, which involves adjusting asset allocations to achieve the best possible risk-return ratio. Currently, the presence of highly correlated assets limits diversification benefits. By reallocating these assets, the portfolio can potentially move closer to the Efficient Frontier, optimizing returns for the level of risk taken. This process does not necessarily mean changing the portfolio's overall diversification or goals, but rather fine-tuning existing allocations for improved efficiency.

Dividends Info

  • Fidelity UCITS SICAV - Fidelity US Quality Income UCITS ETF 0.50%
  • iShares Core MSCI EM IMI UCITS ETF 2.40%
  • iShares Euro Dividend UCITS ETF 5.50%
  • iShares Core S&P 500 UCITS ETF USD (Dist) 1.00%
  • Weighted yield (per year) 1.66%

With a total dividend yield of 1.66%, the portfolio provides a modest income stream. The iShares Euro Dividend ETF contributes significantly with a 5.50% yield, enhancing the portfolio's income potential. Dividends can offer a steady cash flow, which is beneficial for cautious investors seeking income alongside growth. While dividends are a valuable component, focusing solely on high yields can sometimes lead to increased risk. Balancing dividend-paying assets with growth-oriented ones can provide a more comprehensive investment strategy.

Ongoing product costs Info

  • iShares Core MSCI Japan IMI UCITS ETF USD (Acc) 1.00%
  • Fidelity UCITS SICAV - Fidelity US Quality Income UCITS ETF 0.25%
  • iShares Core MSCI EM IMI UCITS ETF 0.18%
  • iShares Euro Dividend UCITS ETF 0.40%
  • iShares Asia Pacific Dividend UCITS 0.59%
  • iShares Core S&P 500 UCITS ETF USD (Dist) 0.07%
  • Vanguard EUR Eurozone Government Bond UCITS ETF EUR Accumulation 0.07%
  • Weighted costs total (per year) 0.29%

The portfolio's total expense ratio (TER) is 0.29%, which is competitive and supports better long-term performance by minimizing costs. The iShares Core MSCI Japan ETF has the highest cost at 1.00%, while others like the Vanguard Eurozone Government Bond ETF are significantly lower at 0.07%. Keeping costs low is crucial as they can erode returns over time. Regularly reviewing and potentially replacing high-cost funds with more cost-effective alternatives can enhance the portfolio's overall efficiency and return potential.

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