A concentrated portfolio with high exposure to European technology stocks and limited diversification
Report created on Dec 24, 2024Risk profile
5/7
Diversification profile
2/5
Positions
-
SA SAP SE
SAP - DE0007164600 85.00% -
CG Amundi ETF DAX UCITS ETF DR EUR
CG1G - FR0010655712 10.00% -
BR Berkshire Hathaway Inc
BRYN - US0846707026 5.00%
The portfolio is heavily weighted towards SAP SE, making up 85% of the total assets. This concentration poses significant risk, as it relies heavily on the performance of a single company. The remaining 15% is split between an ETF tracking the DAX index and Berkshire Hathaway, offering some diversification but still limited. A more balanced portfolio typically includes a mix of stocks, bonds, and other assets to spread risk. Consider diversifying further to reduce reliance on one company and improve stability.
Growth
Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 18.34%. However, it has also experienced a significant maximum drawdown of -36.01%, indicating vulnerability during market downturns. While past performance is impressive, it is important to remember that it does not guarantee future results. Comparing this to a benchmark index could provide further insights into performance relative to the market.
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With a median projection of 439.32% and a 67th percentile of 703.05%, the outlook is optimistic. However, the 5th percentile projects a much lower return of 37.91%, highlighting potential risks. These projections are based on historical data and do not account for future market conditions, so exercise caution when relying on them for decision-making.
Asset classes
- Stocks 90%
The portfolio is predominantly invested in stocks, accounting for 90% of the assets. This high allocation to equities can lead to significant growth potential but also increases exposure to market volatility. A more diversified asset class allocation, including bonds or alternative investments, could help mitigate risk and provide a more stable return. Comparing asset class weights to a balanced benchmark might reveal areas for improvement.
Sectors
- Technology 85%
- Financials 5%
The portfolio is heavily concentrated in the technology sector, representing 85% of the holdings. This sectoral focus can lead to higher volatility, especially during periods of interest rate changes or regulatory shifts. Financial services make up the remaining 5%. A more balanced sector allocation would reduce risk and enhance diversification. Consider exploring sectors like healthcare or consumer goods to achieve a better balance.
Regions
- Europe Developed 85%
- North America 5%
Geographically, the portfolio is primarily exposed to developed European markets, with 85% of the assets in this region. North America accounts for just 5%. This limited geographic diversification could increase vulnerability to regional economic downturns or political instability. A more globally diversified portfolio typically includes exposure to emerging markets and other regions to balance risks and opportunities.
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 could benefit from optimization using the Efficient Frontier, a concept that identifies the best possible risk-return ratio. By adjusting the allocation among current assets, the portfolio could achieve a more favorable balance between risk and return. This optimization does not necessarily mean adding new assets but rather rebalancing existing ones to maximize efficiency.
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