A balanced yet equity-heavy portfolio with significant exposure to North American markets

Report created on Jun 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists entirely of equities, with 75% allocated to the iShares Core S&P 500 UCITS ETF and 25% to the iShares Core EURO STOXX 50 ETF. This composition leans heavily towards large-cap stocks, primarily from North America and Europe. Compared to a typical balanced portfolio, which often includes bonds or other asset classes, this one is more concentrated in equities. This can result in higher potential returns but also increased volatility. It might be beneficial to introduce other asset classes, like fixed income or commodities, to enhance diversification and potentially reduce risk.

Growth Info

The portfolio has shown strong historical performance with a Compound Annual Growth Rate (CAGR) of 13.16%. This suggests it has grown significantly over time, outperforming many benchmarks. However, it also experienced a maximum drawdown of -34.20%, indicating considerable volatility during market downturns. While past performance is not an indicator of future results, understanding these trends can help set expectations. To mitigate potential drawdowns, consider a more diversified approach, possibly incorporating less volatile assets.

Projection Info

Using Monte Carlo simulation, this portfolio's future performance was projected across 1,000 scenarios. The median outcome suggests a potential growth of 344.8%, with 990 simulations showing positive returns. However, the 5th percentile indicates a possible outcome as low as 48.4%. Monte Carlo simulations rely on historical data, which may not predict future events like market crashes or booms. While these projections are promising, it's wise to remain cautious and consider diversifying further to protect against unforeseen downturns.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate. This concentration in equities may result in higher volatility and risk, particularly during market downturns. A more balanced asset class allocation could enhance diversification and potentially stabilize returns. Consider adding fixed income or alternative investments to create a more resilient portfolio, especially if market conditions become unfavorable for equities.

Sectors Info

  • Technology
    29%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Industrials
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is heavily weighted towards the technology sector, making up 29% of the total allocation. This concentration aligns with many benchmarks but could lead to increased volatility, especially during periods of tech sector underperformance. Other sectors like financial services and consumer cyclicals provide some balance. To mitigate risk, consider diversifying sector exposure further, potentially reducing reliance on technology and increasing allocations to defensive sectors.

Regions Info

  • North America
    75%
  • Europe Developed
    25%

With 75% of the portfolio allocated to North American equities and 25% to European equities, there is a significant geographic concentration. This allocation aligns with global benchmarks but may expose the portfolio to regional economic downturns. Consider increasing exposure to other regions, such as Asia or emerging markets, to enhance diversification and reduce geographic risk. This could potentially provide access to different growth opportunities and economic cycles.

Market capitalization Info

  • Mega-cap
    54%
  • Large-cap
    32%
  • Mid-cap
    14%

The portfolio is predominantly invested in large-cap stocks, with 54% in mega caps and 32% in big caps. This focus on larger companies can offer stability and lower risk compared to smaller companies. However, it may limit growth potential. Introducing mid or small-cap stocks could increase diversification and provide access to higher growth opportunities. Balancing market capitalizations can help capture a wider range of market dynamics and potential returns.

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.

Currently, the portfolio is heavily weighted in equities, which may not lie on the Efficient Frontier—a concept that represents the best possible risk-return trade-off. By adjusting allocations within the current asset mix, the portfolio could potentially achieve a more optimal balance. Consider exploring different combinations of existing assets to improve the risk-return ratio, possibly incorporating some lower-risk investments to achieve a more efficient portfolio.

Ongoing product costs Info

  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • iShares VII PLC - iShares Core EURO STOXX 50 ETF EUR Acc 0.10%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is impressively low at 0.12%, which is beneficial for long-term performance. Lower costs mean more of your investment returns are retained, compounding over time. This cost efficiency aligns with best practices in portfolio management. Continue to monitor and compare costs with other investment options to ensure ongoing competitiveness. Keeping costs low is a key factor in maximizing net returns over the investment horizon.

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