Balanced Portfolio with Broad Diversification and Strong Historical Performance but High North American Exposure

Report created on Nov 23, 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 split evenly between two Vanguard ETFs, the S&P 500 UCITS Acc and the FTSE All-World UCITS ETF USD Accumulation. This composition provides a balanced approach, giving exposure to a wide range of global markets while maintaining a focus on North America. The equal allocation to these ETFs ensures a diversified investment strategy, reducing the risk associated with any single market. However, the high concentration in North America may lead to overexposure to this region's economic fluctuations. To optimize diversification, consider adjusting allocations to achieve a more balanced geographic exposure.

Growth Info

Historically, the portfolio has performed impressively, with a compound annual growth rate (CAGR) of 14.0%. This indicates a strong return on investment over time, reflecting the robust performance of the underlying assets. The maximum drawdown of -25.32% suggests that the portfolio has experienced significant volatility, which is typical for equity-heavy investments. Investors should be aware of the potential for large fluctuations in value. To mitigate this risk, consider diversifying further or incorporating more stable asset classes into the portfolio to cushion against market downturns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected, assuming a hypothetical initial investment. The results show a wide range of possible outcomes, with a 5th percentile return of 90.36% and a 67th percentile return of 706.15%. This variability highlights the inherent uncertainty in investment returns. The annualized return across all simulations is 14.97%, indicating a strong potential for future growth. However, investors should remain cautious and consider their risk tolerance when interpreting these projections, as actual results may differ significantly.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, accounting for 99.97% of its asset allocation. This heavy reliance on equities provides the potential for high returns but also exposes the portfolio to significant market volatility. A small percentage is allocated to other asset classes, cash, and unclassified assets, which offer minimal diversification benefits. To reduce risk, consider incorporating a broader range of asset classes, such as bonds or alternative investments, to create a more balanced and resilient portfolio that can better withstand market fluctuations.

Sectors Info

  • Technology
    29%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation in the portfolio is diverse, with significant investments in technology (29.15%), financial services (14.50%), and healthcare (11.00%). This diversification across sectors helps mitigate the impact of downturns in any single industry. However, the heavy weighting towards technology could lead to increased volatility, given the sector's sensitivity to economic changes and innovation cycles. To enhance stability, consider rebalancing to achieve a more even distribution across sectors, potentially reducing the emphasis on technology while increasing exposure to more stable industries, such as consumer staples or utilities.

Regions Info

  • North America
    82%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic composition is heavily skewed towards North America, comprising 81.98% of the total allocation. This concentration may expose the portfolio to regional economic risks and fluctuations. While there is some exposure to Europe, Asia, and other regions, the overall allocation is relatively low. To achieve a more globally balanced portfolio, consider increasing investments in underrepresented regions. This could provide better protection against localized economic downturns and enhance the portfolio's resilience by leveraging growth opportunities in diverse markets around the world.

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 is close to the efficient frontier, indicating a good balance between risk and return. However, there is room for optimization to achieve an expected return of 14.13% with a lower risk level. The efficient frontier represents the set of optimal portfolios offering the highest expected return for a defined level of risk. While the current portfolio is efficient, investors should consider their risk preferences and explore adjustments to align with their desired risk-return profile. This could involve reallocating assets or incorporating additional asset classes to enhance diversification.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.14%

The portfolio's costs are relatively low, with a total expense ratio (TER) of 0.14%. This is advantageous for long-term investors, as lower costs can significantly enhance net returns over time. The low fees are attributed to the use of Vanguard ETFs, known for their cost-effectiveness. While the current costs are favorable, investors should remain vigilant in monitoring any changes in fees or expenses. To maintain a cost-efficient portfolio, consider regularly reviewing expense ratios and exploring opportunities to reduce costs further, such as through fee-free trading platforms or tax-efficient investment strategies.

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