Cautious Yet Diversified Portfolio with Strong Global Exposure and Low Costs
Report created on Jun 14, 2024Risk profile
3/7
Diversification profile
4/5
Positions
-
VW Vanguard FTSE All-World UCITS ETF USD Accumulation
VWCE - IE00BK5BQT80 60.00% -
LY Amundi Stoxx Europe 600 UCITS ETF C EUR
LYP6 - LU0908500753 30.00% -
XN Xtrackers Nikkei 225 UCITS ETF 1C EUR
XNKY - LU2196470426 10.00%
The portfolio is largely composed of three ETFs, with Vanguard FTSE All-World UCITS ETF making up 60%, Amundi Stoxx Europe 600 ETF at 30%, and Xtrackers Nikkei 225 ETF at 10%. This composition reflects a cautious investment profile, with a strong emphasis on global diversification. The focus on ETFs offers an efficient way to gain exposure to a wide array of markets while keeping costs low. The mix of these funds provides a solid foundation for a diversified portfolio, reducing the risk associated with individual stock investments.
Growth
Historically, this portfolio has performed well, with a compound annual growth rate of 13.69%. The max drawdown of -16.39% indicates some volatility, but not excessive given the returns. The fact that 24 days make up 90% of the returns highlights the importance of staying invested during volatile periods. This performance suggests that the portfolio is well-positioned to capture market gains while managing risk. Consistent performance over time can lead to significant wealth accumulation, especially when compounded over the long term.
Projection
Using a Monte Carlo simulation, which projects potential future outcomes based on historical data, the portfolio shows promising potential. With 1,000 simulations, the 5th percentile indicates a modest 97.68% return, while the median (50th percentile) shows a 365.79% return. Impressively, 996 simulations resulted in positive returns, with an average annualized return of 12.68%. This suggests a high likelihood of favorable outcomes, reinforcing the portfolio's strong historical performance. Monte Carlo simulations provide a robust framework for understanding potential risks and returns, helping to set realistic expectations.
Asset classes
- Stocks 100%
The portfolio is heavily weighted in stocks, with 99.74% of assets in equities, and minimal allocations in cash and other categories. This indicates a high exposure to market fluctuations, which can be beneficial in a rising market but may increase risk during downturns. While the focus on equities aligns with growth objectives, it may be prudent to consider diversifying into other asset classes to balance risk. A more diversified asset allocation can enhance stability and reduce the impact of market volatility on the overall portfolio.
Sectors
- Technology 20%
- Financials 16%
- Industrials 13%
- Health Care 12%
- Consumer Discretionary 11%
- Telecommunications 7%
- Consumer Staples 7%
- Basic Materials 5%
- Energy 4%
- Utilities 3%
- Real Estate 2%
Sector allocation is well-diversified, with technology leading at nearly 20%, followed by financial services and industrials. This diversification across sectors helps mitigate risk, as poor performance in one sector can be offset by gains in another. However, the significant weighting in technology suggests a reliance on this sector's continued growth. It could be beneficial to monitor sector exposures and adjust as necessary to ensure balanced growth. A diversified sector allocation can provide resilience against sector-specific downturns.
Regions
- North America 39%
- Europe Developed 39%
- Japan 14%
- Asia Emerging 4%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio has a strong focus on developed markets, with North America and Europe Developed making up over 77% of the allocation. This provides exposure to stable, mature economies, but limits potential growth opportunities in emerging markets. The inclusion of Japan adds further diversification, although the allocation to Asia Emerging and other regions is minimal. While developed markets offer stability, increasing exposure to emerging markets could enhance growth potential. Geographic diversification can help capture growth in various economic environments.
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 currently well-diversified, but there is room for optimization by adjusting the risk-return profile along the efficient frontier. Moving towards a riskier portfolio could involve increasing exposure to emerging markets or alternative assets, while a more conservative approach might include adding bonds or cash equivalents. Before making changes, consider the impact on overall diversification and alignment with investment goals. It's essential to balance the desire for higher returns with the ability to tolerate increased risk, ensuring the portfolio remains aligned with the investor's objectives.
Ongoing product costs
- Amundi Stoxx Europe 600 UCITS ETF C EUR 0.07%
- Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
- Xtrackers Nikkei 225 UCITS ETF 1C EUR 0.09%
- Weighted costs total (per year) 0.16%
The portfolio benefits from low costs, with an overall total expense ratio of 0.16%. This is advantageous, as lower costs mean more of the portfolio's returns are retained by the investor. Keeping expenses low is a key component of maximizing long-term returns, as high fees can erode gains over time. The focus on ETFs, which generally have lower expense ratios compared to actively managed funds, supports this cost-efficient approach. Maintaining a low-cost structure is crucial for enhancing net returns and achieving investment goals.
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