A broadly diversified portfolio with a balanced risk profile and significant North American exposure
Report created on Dec 14, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAA - IE00BFMXXD54 55.00% -
EQ Invesco EQQQ NASDAQ-100 UCITS ETF Acc
EQQB - IE00BFZXGZ54 20.00% -
VW Vanguard FTSE All-World UCITS ETF USD Accumulation
VWCE - IE00BK5BQT80 20.00% -
IS iShares Core MSCI Emerging Markets IMI UCITS
IS3N - IE00BKM4GZ66 5.00%
The portfolio is composed primarily of equity ETFs, with a strong emphasis on the Vanguard S&P 500 UCITS Acc, which constitutes 55% of the total allocation. The Invesco EQQQ NASDAQ-100 and Vanguard FTSE All-World ETFs each hold a 20% share, while the iShares Core MSCI Emerging Markets ETF represents 5%. This composition reflects a focus on large-cap U.S. equities, with a modest allocation to global and emerging markets. Understanding the composition is crucial as it dictates the portfolio's risk and return characteristics. To enhance diversification, consider introducing other asset classes such as bonds or real estate, which can mitigate risk and provide more balanced exposure.
Growth
Historically, the portfolio has delivered a robust compound annual growth rate (CAGR) of 15.66%, with a maximum drawdown of 16.54%. This indicates strong performance but also highlights potential volatility during market downturns. Historical performance provides insights into how the portfolio has fared over time, although past results do not guarantee future outcomes. To manage potential drawdowns, consider incorporating assets with lower volatility or strategies that can hedge against market declines, such as options or inverse ETFs.
Projection
Using Monte Carlo simulations, the portfolio's forward projection shows a wide range of potential outcomes. With 1,000 simulations, the 5th percentile projects a 110.61% return, while the 50th percentile suggests a 459.36% increase. Monte Carlo analysis uses historical data to simulate future performance, highlighting potential risks and returns. While informative, these projections are not definitive and should be used as one of many tools in decision-making. To improve accuracy, regularly update simulations with the latest market data and adjust the portfolio as needed.
Asset classes
- Stocks 100%
The portfolio is heavily weighted towards stocks, with 99.99% of its allocation in equities. This concentration exposes the portfolio to market volatility and equity-specific risks. Asset class diversification is crucial as it helps spread risk across different types of investments, potentially enhancing returns and reducing volatility. To achieve better diversification, consider adding fixed-income securities, commodities, or alternative investments, which can act as a buffer during equity market downturns.
Sectors
- Technology 35%
- Financials 12%
- Consumer Discretionary 11%
- Telecommunications 10%
- Health Care 10%
- Industrials 7%
- Consumer Staples 6%
- Energy 3%
- Basic Materials 2%
- Utilities 2%
- Real Estate 2%
The portfolio is predominantly invested in the technology sector, accounting for 34.57% of the allocation, followed by financial services and consumer cyclicals. This sectoral concentration can lead to heightened volatility, especially if these industries face headwinds. Sector diversification is important as it reduces reliance on specific industries and spreads risk. To achieve a more balanced sectoral exposure, consider reallocating funds to underrepresented sectors such as real estate or utilities, which can offer stability and income.
Regions
- North America 87%
- Asia Emerging 4%
- Europe Developed 4%
- Asia Developed 2%
- Japan 1%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is heavily skewed towards North America, with 87.11% of assets allocated there. This concentration increases exposure to the U.S. market's economic and political risks. Geographic diversification is key to managing regional risks and capturing growth opportunities in different markets. To enhance geographic diversification, consider increasing exposure to Europe, Asia, or emerging markets, which can offer growth potential and reduce dependence on a single region.
Redundant positions
-
High correlationVanguard FTSE All-World UCITS ETF USD AccumulationVanguard S&P 500 UCITS Acc
The portfolio contains highly correlated assets, particularly between the Vanguard FTSE All-World and Vanguard S&P 500 ETFs. High correlation means that these assets tend to move in tandem, reducing diversification benefits. Understanding asset correlation helps in constructing a portfolio that minimizes risk through diversification. To improve diversification, consider replacing one of the correlated ETFs with an asset that has a lower correlation to the existing holdings, thereby enhancing the portfolio's risk-return profile.
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 potentially be optimized using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio. Currently, the portfolio contains overlapping assets that do not contribute to diversification. Optimization involves adjusting asset allocations to achieve a more efficient balance of risk and return. By removing or reducing highly correlated assets and reallocating funds to less correlated investments, the portfolio can achieve a more optimal risk-return profile, enhancing overall performance.
Ongoing product costs
- Invesco EQQQ NASDAQ-100 UCITS ETF Acc 0.35%
- iShares Core MSCI Emerging Markets IMI UCITS 0.18%
- Vanguard S&P 500 UCITS Acc 0.07%
- Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
- Weighted costs total (per year) 0.16%
The portfolio's total expense ratio (TER) is 0.16%, with the Invesco EQQQ NASDAQ-100 ETF having the highest individual cost at 0.35%. Lower costs are advantageous as they improve net returns over time. Cost management is crucial in maximizing investment returns, as high fees can erode gains. To reduce costs, consider switching to lower-cost ETFs or funds with similar exposure. Regularly reviewing and optimizing costs can lead to significant savings over the long term.
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