Balanced Portfolio with Moderate Diversification and High Technology Exposure Suited for Growth-Oriented Investors

Report created on Jul 19, 2024

Risk profile Info

4/7
Balanced
← Less risk More risk →

Diversification profile Info

3/5
Moderately Diversified
← Less diversification More diversification →

Positions

The portfolio consists of six ETFs, with a significant portion in the Amundi S&P 500 and Lyxor MSCI Semiconductors. This mix indicates a focus on large-cap U.S. equities and the semiconductor sector. The smaller allocations to global equities, artificial intelligence, healthcare, and gold provide some diversification. However, the concentration in technology and U.S. markets suggests a growth-oriented strategy. A balanced approach like this can benefit from potential tech sector growth but may also be more susceptible to market volatility. It's crucial to maintain a balance to mitigate risks while capitalizing on growth opportunities.

Growth Info

Historically, this portfolio has performed well, with a CAGR of 17.3%. An initial hypothetical investment has shown robust growth, though it has experienced a max drawdown of -19.62%. The portfolio's performance is concentrated, with just 19 days making up 90% of returns. This indicates a reliance on certain high-performing periods, which could suggest vulnerability to market downturns. While the past performance is impressive, it's essential to remember that past results don't guarantee future outcomes. Diversifying further could help stabilize returns and reduce reliance on specific market conditions.

Projection Info

Using a Monte Carlo simulation, we assessed potential future outcomes for this portfolio with a hypothetical initial investment. The simulation, involving 1,000 trials, shows a wide range of possible outcomes. The 5th percentile indicates a 140.75% return, while the median (50th percentile) projects a 651.6% return, and the 67th percentile suggests a 914.82% return. With 998 simulations showing positive returns and an annualized return of 16.8%, the portfolio appears to have a favorable outlook. However, it's important to consider that these are probabilistic projections, and actual results can vary.

Asset classes Info

  • Stocks
    64%
  • Other
    6%

The portfolio is primarily composed of stocks, making up 63.76% of the allocation, with a small portion in other asset classes like gold and cash. This allocation reflects a growth-oriented strategy, prioritizing equity exposure. While equities generally offer higher returns over the long term, they also come with increased risk and volatility. Balancing this equity-heavy portfolio with more diversified asset classes could help mitigate risk. Consider exploring options to include more bonds or other fixed-income instruments to create a more balanced risk-return profile.

Sectors Info

  • Technology
    22%
  • Health Care
    14%
  • Financials
    7%
  • Telecommunications
    5%
  • Consumer Discretionary
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio's sector allocation is heavily skewed towards technology, with a 21.77% allocation. This is followed by healthcare and financial services. While technology and healthcare sectors can offer significant growth potential, this concentration increases vulnerability to sector-specific risks. Sector diversification could enhance risk management and provide stability. Diversifying into other sectors like consumer staples or utilities could provide defensive characteristics, helping to cushion against sector downturns. A more balanced sector allocation could improve the portfolio's resilience against market fluctuations.

Regions Info

  • North America
    57%
  • Europe Developed
    4%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly invested in North America, with 57.24% exposure. This heavy reliance on a single region can expose the portfolio to regional economic risks. While North America, particularly the U.S., offers numerous growth opportunities, it may be beneficial to diversify geographically. Expanding allocations to other developed markets or emerging regions could provide additional growth avenues and reduce regional risk exposure. A more geographically balanced portfolio can help mitigate the impact of regional economic downturns and enhance long-term performance.

Redundant positions Info

  • Amundi Index Solutions - Amundi S&P 500 UCITS ETF C EUR
    iShares Core MSCI World UCITS ETF USD (Acc)
    High correlation

The portfolio contains highly correlated assets, particularly between the Amundi S&P 500 and iShares Core MSCI World ETFs. High correlation indicates that these assets tend to move in tandem, providing limited diversification benefits. Reducing overlap by selecting less correlated assets can enhance diversification and reduce portfolio risk. It's important to identify and understand correlations within the portfolio to ensure a balanced risk profile. By diversifying into less correlated assets, the portfolio can better withstand market volatility and improve overall 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.

Portfolio optimization can be achieved by first addressing the existing overlaps and high correlations among assets. By reducing these overlaps, the portfolio can potentially improve its diversification and risk-return profile. Moving along the efficient frontier allows for adjustments towards either a riskier or more conservative allocation. To achieve a more conservative portfolio, consider increasing allocations to bonds or other defensive assets. For a riskier portfolio, further exposure to growth-oriented sectors or regions might be considered. Focus on aligning the portfolio with personal risk tolerance and investment goals.

Ongoing product costs Info

  • Amundi Index Solutions - Amundi S&P 500 UCITS ETF C EUR 0.15%
  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • Lyxor MSCI Semiconductors ESG Filtered UCITS ETF - Acc EUR 0.45%
  • Xtrackers Artificial Intelligence &Big Data UCITS ETF 1C 0.35%
  • Xtrackers MSCI World Health Care UCITS ETF 1C 0.25%
  • Weighted costs total (per year) 0.27%

The portfolio's total expense ratio (TER) is 0.27%, which is relatively low and cost-effective. The individual ETFs have varying expense ratios, with the Lyxor MSCI Semiconductors ETF being the highest at 0.45%. Keeping costs low is crucial for maximizing net returns over time. While the current TER is reasonable, it's always beneficial to regularly review and compare costs. Ensuring that the portfolio remains cost-efficient will help preserve returns. Consider monitoring expense ratios and exploring lower-cost alternatives to maintain an efficient portfolio.

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