A balanced portfolio with strong S&P 500 focus and moderate international exposure
Report created on Mar 22, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAA - IE00BFMXXD54 62.00% -
VE Vanguard FTSE Developed Europe ex UK UCITS
VERX - IE00BKX55S42 28.00% -
IS iShares Core MSCI Emerging Markets IMI UCITS
IS3N - IE00BKM4GZ66 10.00%
The portfolio is heavily weighted towards the Vanguard S&P 500 UCITS ETF, comprising 62% of the total allocation. This ETF provides exposure to large-cap U.S. equities. The Vanguard FTSE Developed Europe ex UK UCITS ETF follows with 28%, focusing on European markets excluding the UK. The remaining 10% is allocated to the iShares Core MSCI Emerging Markets IMI UCITS ETF, offering exposure to emerging markets. This composition leans towards developed markets, particularly the U.S., which may be beneficial for stability. However, it lacks significant diversification across different asset classes like bonds or commodities. Consider diversifying into other asset classes to potentially reduce risk and enhance returns.
Growth
Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 11.75%. This indicates robust growth over time, outperforming many benchmarks. However, the maximum drawdown of -33.37% suggests vulnerability during market downturns. The portfolio's returns are concentrated, with just 17 days accounting for 90% of the gains. This concentration highlights potential volatility. While past performance is not an indicator of future results, the historical data suggests a strong growth trajectory. To mitigate drawdowns, consider incorporating assets with lower volatility or hedging strategies.
Projection
The Monte Carlo simulation, which uses historical data to predict future outcomes, projects an annualized return of 10.20% for this portfolio. With 1,000 simulations, 95.3% resulted in positive returns, indicating a high probability of growth. However, the 5th percentile outcome of just 5% suggests there is still downside risk. The median (50th percentile) projection is a strong 213.3% growth, reflecting the portfolio's potential. While simulations provide insight, they rely on historical data and assumptions, which may not account for future market conditions. Regularly reviewing and adjusting the portfolio can help align it with changing market dynamics.
Asset classes
- Stocks 100%
The portfolio is entirely composed of stocks, with no allocation to bonds, cash, or alternative assets. This 100% equity exposure can drive high returns but also increases risk, especially during market downturns. Diversifying across asset classes, such as including fixed income or real assets, could potentially reduce volatility and enhance risk-adjusted returns. While equities offer growth potential, a more balanced allocation may provide stability and income, particularly for investors with lower risk tolerance or nearing retirement.
Sectors
- Technology 25%
- Financials 17%
- Health Care 11%
- Consumer Discretionary 11%
- Industrials 11%
- Telecommunications 8%
- Consumer Staples 6%
- Basic Materials 3%
- Energy 3%
- Utilities 3%
- Real Estate 2%
The portfolio's sector allocation is led by technology at 25%, followed by financial services at 17%, and healthcare at 11%. This concentration in technology may lead to higher volatility, especially during periods of regulatory scrutiny or interest rate hikes. However, it also positions the portfolio to benefit from technological advancements. The diversification across 10 sectors is commendable, reducing the risk of sector-specific downturns. Maintaining a balanced approach across sectors can help mitigate risks while capturing growth opportunities. Consider monitoring sector trends and adjusting allocations as needed.
Regions
- North America 62%
- Europe Developed 28%
- Asia Emerging 5%
- Asia Developed 3%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is predominantly focused on North America (62%) and Europe Developed (28%), with limited exposure to Asia Emerging (5%) and other regions. This concentration in developed markets, particularly the U.S., provides stability but limits potential growth from emerging markets. Increasing exposure to regions like Asia or Latin America could enhance diversification and capture growth opportunities in rapidly developing economies. While developed markets offer stability, emerging markets can provide higher returns due to their growth potential.
Market capitalization
- Mega-cap 48%
- Large-cap 35%
- Mid-cap 16%
- Small-cap 1%
The portfolio is heavily weighted towards mega-cap companies at 48%, followed by big caps at 35%. Medium caps account for 16%, while small caps are just 1%. This focus on larger companies offers stability and lower volatility but may limit growth potential compared to smaller companies. Including more small and mid-cap stocks could enhance diversification and capture higher growth opportunities. While large caps provide stability, smaller companies can deliver substantial returns due to their growth potential.
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 potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. Currently, the portfolio's composition focuses on growth, but adjusting allocations between existing assets could enhance efficiency. The Efficient Frontier considers historical returns and volatility, helping investors achieve the best possible returns for a given level of risk. While the portfolio is well-structured, exploring optimization opportunities could further improve performance. Regularly revisiting asset allocations can ensure alignment with investment goals.
Ongoing product costs
- iShares Core MSCI Emerging Markets IMI UCITS 0.18%
- Vanguard FTSE Developed Europe ex UK UCITS 0.10%
- Vanguard S&P 500 UCITS Acc 0.07%
- Weighted costs total (per year) 0.09%
The portfolio boasts low costs, with a Total Expense Ratio (TER) of 0.09%. This is advantageous for long-term returns, as lower fees mean more money stays invested. The individual ETFs have TERs ranging from 0.07% to 0.18%, reflecting cost-effective management. Keeping costs low is crucial for maximizing returns, especially over extended periods. This cost efficiency aligns well with best practices, ensuring the portfolio remains competitive. Regularly reviewing fees and seeking cost-effective alternatives can further enhance returns.
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