A balanced and diversified ETF portfolio with a strong focus on North American equities

Report created on Jan 8, 2025

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 heavily weighted in equities, with a significant portion invested in Vanguard ETFs, particularly the FTSE All-World and S&P 500. This composition aligns well with a balanced investment strategy, emphasizing global exposure while maintaining a focus on established markets. Compared to common benchmarks, this portfolio shows a strong preference for global and North American equities. While this is a robust structure for growth, consider adding other asset types like bonds for more stability. This could provide a buffer against market volatility and enhance overall resilience.

Growth Info

The historical performance of the portfolio, indicated by a 12.31% Compound Annual Growth Rate (CAGR), suggests strong growth potential. This figure is impressive compared to typical market benchmarks, reflecting the portfolio's solid asset selection. However, it's crucial to remember that past performance doesn't guarantee future results. The maximum drawdown of -33.27% highlights potential volatility risks. To mitigate this, consider strategies to protect against downturns, such as diversification into less volatile assets. This balance between risk and return is essential for maintaining long-term growth while managing potential losses.

Projection Info

Monte Carlo simulations provide a forward-looking analysis using historical data to predict a range of possible outcomes. With a median projection of 268.34% and a 5th percentile at 20.74%, the portfolio shows potential for substantial growth. However, it's important to note that these projections are not guarantees. The high number of simulations with positive returns (972 out of 1,000) indicates a favorable outlook, but investors should remain cautious. Regularly reviewing and adjusting the portfolio to align with changing market conditions and personal goals can help optimize outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly allocated to stocks, representing 99.93% of the total assets. This heavy concentration in equities suggests a strong commitment to growth, as stocks typically offer higher returns over the long term. However, this also exposes the portfolio to higher volatility. Compared to benchmark norms, which often include bonds and other asset classes, this allocation lacks diversification. Introducing fixed-income securities or other asset classes could help mitigate risk and provide more consistent returns. Diversifying across asset classes can enhance stability and reduce the impact of market fluctuations.

Sectors Info

  • Technology
    26%
  • Financials
    17%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation in this portfolio is notably concentrated in technology (25.79%) and financial services (16.50%). This mirrors current market trends but may increase volatility, especially during tech market corrections or interest rate changes. Compared to benchmarks, this portfolio is tech-heavy, which could be advantageous during periods of tech growth but risky during downturns. Balancing sector exposure by considering underrepresented areas like utilities or consumer defensives could enhance stability. This approach can help manage sector-specific risks and ensure a more resilient performance across different economic cycles.

Regions Info

  • North America
    61%
  • Europe Developed
    18%
  • Asia Emerging
    9%
  • Asia Developed
    5%
  • Japan
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

The portfolio's geographic allocation is heavily skewed towards North America at 61.07%, with developed Europe and emerging Asia following. This distribution reflects a strong focus on mature markets, offering stability and growth potential. However, it underrepresents regions like Latin America and Africa, which could provide diversification benefits. Compared to global benchmarks, this portfolio is less geographically diversified. Increasing exposure to emerging markets could enhance growth opportunities and reduce reliance on North American performance. This diversification can help spread risk and capture growth in different economic environments.

Redundant positions Info

  • Vanguard S&P 500 UCITS Acc
    Vanguard FTSE All-World UCITS ETF
    High correlation

The portfolio has a notable correlation between the Vanguard S&P 500 UCITS Acc and the Vanguard FTSE All-World UCITS ETF. High correlation suggests that these assets tend to move in tandem, reducing diversification benefits. During market downturns, such correlation may amplify risks, as similar assets could decline simultaneously. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio. This adjustment can enhance risk management and provide a more balanced performance across different market conditions.

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.

Optimizing this portfolio using the Efficient Frontier concept could enhance its risk-return profile. This approach focuses on achieving the best possible return for a given level of risk by adjusting asset weights. Currently, the portfolio may benefit from reducing highly correlated assets and incorporating more diverse options. This optimization process can help identify areas for improvement and ensure that the portfolio is aligned with the investor's risk tolerance and goals. Regular rebalancing and strategic adjustments can keep the portfolio on track for achieving optimal performance over time.

Dividends Info

  • Vanguard FTSE All-World UCITS ETF 0.90%
  • Weighted yield (per year) 0.38%

The portfolio's dividend yield is relatively low at 0.38%, primarily driven by the Vanguard FTSE All-World UCITS ETF's 0.9% yield. For investors seeking income, this may not be sufficient. Dividends can provide a steady income stream and contribute to total returns, especially in low-growth environments. To increase income potential, consider adding higher-yielding assets, such as dividend-focused ETFs or stocks. This can enhance cash flow and provide a buffer against capital losses. Balancing growth and income objectives is crucial for aligning the portfolio with long-term financial goals.

Ongoing product costs Info

  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • Vanguard FTSE Developed Europe ex UK UCITS 0.10%
  • Vanguard FTSE All-World UCITS ETF 0.22%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, which is quite competitive and supports better long-term performance by minimizing costs. Low fees are crucial because they directly impact net returns over time. Compared to industry standards, this portfolio is well-positioned in terms of cost efficiency. However, it's essential to regularly review these expenses and explore opportunities to reduce them further. Consider evaluating alternative low-cost ETFs or funds that offer similar exposure. Maintaining a focus on cost management can enhance overall returns and support financial objectives.

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