A broadly diversified ETF portfolio with significant exposure to technology and North America

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 predominantly composed of two ETFs: Vanguard FTSE All-World UCITS ETF and iShares Core MSCI World UCITS ETF, with an 80% and 20% allocation respectively. This structure leans heavily on equity investments, offering broad global exposure. Compared to common benchmarks, this allocation is well-balanced but lacks diversity in asset classes, as it primarily focuses on stocks with minimal cash and other assets. To enhance diversification, consider introducing other asset types like bonds or real estate, which can provide stability during market volatility.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 12.99%. This indicates strong growth over time, especially when compared to typical equity benchmarks. However, it also experienced a maximum drawdown of -33.45%, highlighting potential volatility. While past performance is not a guarantee of future results, understanding these trends can help manage expectations. To mitigate potential downturns, consider strategies to reduce volatility, such as diversifying into less correlated assets.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a 50th percentile return of 457.58% and an annualized return of 14.2%. Monte Carlo simulations use historical data to model potential future scenarios, but it’s important to note that these are not predictions. While the projections are optimistic, they rely on past performance trends that may not hold in future markets. Regularly reviewing and adjusting your portfolio can help align it with changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in equities, with nearly 100% allocation to stocks. This concentration can drive growth but may also increase risk due to market volatility. Compared to balanced benchmarks, which often include bonds and other asset classes, this portfolio lacks diversification in asset types. To balance risk and return, consider incorporating bonds or alternative investments, which can provide a buffer during equity market downturns.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation shows a significant tilt towards technology at 25.9%, followed by financial services and healthcare. This concentration in tech may lead to higher returns during tech booms but also exposes the portfolio to sector-specific risks, such as regulatory changes. Compared to global benchmarks, this sector exposure is quite typical but may benefit from more balance. Consider diversifying into underrepresented sectors to mitigate sector-specific risks and enhance overall stability.

Regions Info

  • North America
    68%
  • Europe Developed
    15%
  • Japan
    6%
  • Asia Emerging
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, comprising 67.8% of the allocation. While this aligns with global equity benchmarks, it may limit exposure to growth opportunities in emerging markets. The remaining allocations are spread across Europe, Japan, and other regions, offering some diversification. To enhance global diversification, consider increasing exposure to emerging markets, which can provide growth potential and reduce reliance on North American markets.

Redundant positions Info

  • Vanguard FTSE All-World UCITS ETF USD Accumulation
    iShares Core MSCI World UCITS ETF USD (Acc)
    High correlation

The assets within the portfolio are highly correlated, particularly between the Vanguard FTSE All-World UCITS ETF and the iShares Core MSCI World UCITS ETF. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. During market downturns, this could lead to increased volatility. To improve diversification, consider adding assets with lower correlations, such as bonds or commodities, to reduce overall portfolio risk.

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 current portfolio could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. However, the high correlation between the existing ETFs limits diversification benefits. Before optimizing, consider reducing overlap by replacing one of the ETFs with a less correlated asset. This will enhance diversification and improve the potential for achieving an optimal risk-return balance.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.22%

The portfolio's costs are relatively low, with a total expense ratio (TER) of 0.22%. This is competitive compared to industry averages, supporting better long-term performance by minimizing the drag of fees. Keeping costs low is crucial for maximizing returns over time. Regularly reviewing and comparing fees with similar funds can ensure that the portfolio remains cost-effective and aligned with financial goals.

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