A balanced portfolio with strong North American focus and high technology sector weighting

Report created on Dec 27, 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 three ETFs, with the Vanguard FTSE All-World UCITS ETF making up 40%, and the Invesco EQQQ NASDAQ-100 and iShares Core S&P 500 each contributing 30%. This structure emphasizes equity investments, with a significant portion in well-known indices. Compared to typical balanced portfolios, this one leans heavily towards equities, lacking diversification across other asset classes like bonds. While this setup can offer substantial growth potential, it's essential to recognize its vulnerability to stock market volatility. For more stability, consider incorporating fixed-income assets to cushion against market fluctuations.

Growth Info

Historically, the portfolio has shown impressive performance, with a CAGR of 15.3%. A hypothetical initial investment would have grown significantly over time. However, a max drawdown of -17.21% highlights potential volatility. Compared to benchmarks, performance is strong, but the drawdown is a reminder of the risks involved. While past performance is encouraging, it's crucial to remember that it doesn't guarantee future results. To mitigate potential downturns, consider strategies like diversification or setting stop-loss orders to protect gains.

Projection Info

Forward projections using Monte Carlo simulations indicate a potential annualized return of 17.06%. This method uses historical data to model future outcomes, showing a wide range of possibilities. While the median projection is optimistic, it's important to note that this is based on past trends and assumptions. The 5th percentile projection shows a significant downside risk, emphasizing the need for caution. To prepare for various scenarios, regularly review and adjust your portfolio to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in equities, representing 99.95% of the allocation. This concentration in a single asset class can lead to higher volatility, especially during market downturns. Compared to balanced benchmarks, which often include bonds or other asset classes, this portfolio is less diversified. While equities can offer substantial growth, consider introducing other asset classes like bonds or real estate to reduce risk and improve stability. This can help achieve a more balanced risk-return profile over time.

Sectors Info

  • Technology
    36%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    11%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is notably concentrated in the technology sector, which accounts for 35.59% of the allocation. This exposure can lead to higher volatility, especially during periods of tech market corrections or interest rate hikes. While the tech sector has been a strong performer, it's crucial to maintain diversification across sectors to mitigate risks. Consider adjusting sector weights to align more closely with benchmarks, ensuring exposure to a broader range of industries. This can enhance resilience against sector-specific downturns.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily tilted towards North America, with 85.38% exposure. This concentration can limit diversification benefits and increase vulnerability to region-specific economic changes. While North America has been a strong performer, it's important to consider global diversification to spread risk. Compared to global benchmarks, this portfolio underweights regions like Europe and Asia. Consider increasing exposure to these areas to capture growth opportunities and reduce reliance on a single region's economic performance.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly between the iShares Core S&P 500 and Vanguard FTSE All-World ETFs. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, such correlation can amplify losses. To enhance diversification, consider replacing one of these ETFs with assets that have lower correlation, such as those in different regions or sectors. This can help manage risk and improve overall portfolio resilience.

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 can be optimized using the Efficient Frontier, focusing on achieving the best risk-return ratio with the current assets. Before optimizing, address the high correlation between some assets, as this limits diversification benefits. Efficient Frontier optimization involves adjusting asset weights to maximize returns for a given level of risk. This doesn't necessarily mean adding new assets, but rather reallocating existing ones. Regularly re-evaluate your portfolio's efficiency to ensure it aligns with your risk tolerance and financial objectives.

Ongoing product costs Info

  • Invesco EQQQ NASDAQ-100 UCITS ETF Acc 0.35%
  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.23%

The portfolio's total expense ratio (TER) is 0.23%, which is relatively low and beneficial for long-term returns. Lower costs mean more of your investment returns stay in your pocket, contributing to better compounding over time. Compared to average ETF costs, this portfolio is cost-efficient, supporting your financial goals. To maintain low costs, regularly review and compare the TERs of your holdings. Consider switching to lower-cost options if available, ensuring fees don't erode your investment gains.

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