Balanced Portfolio with Strong Global Diversification and Moderate Risk Offering Growth Potential

Report created on Jun 15, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of two ETFs: iShares Core MSCI World UCITS ETF USD (Acc) making up 70% and Xtrackers MSCI Emerging Markets UCITS ETF 1C comprising 30%. This combination offers broad global exposure across developed and emerging markets. The risk classification is balanced, with a risk score of 4 out of 7, indicating moderate risk. The diversification score is 4 out of 5, reflecting a well-diversified portfolio. This setup is suitable for investors seeking international diversification while maintaining a balanced risk approach.

Growth Info

Historically, this portfolio has delivered a compound annual growth rate (CAGR) of 10.96%, which is impressive for a balanced risk profile. However, it experienced a maximum drawdown of -32.96%, highlighting potential volatility. The concentration of returns in just 26 days emphasizes the importance of staying invested to capture these gains. This performance suggests a strong growth potential, but investors should be prepared for periods of significant downturns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's forward projection shows a wide range of potential outcomes. Assuming a hypothetical initial investment, the 5th percentile projects a 15.67% return, while the median (50th percentile) is 221.71%, and the 67th percentile reaches 335.81%. With 973 simulations showing positive returns, the annualized return across simulations is 9.97%. Monte Carlo simulations provide a probabilistic view, emphasizing the uncertainty and variability in future returns.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, accounting for 99.71%, with minimal allocations in cash, other, and bonds. This stock-heavy allocation aligns with the portfolio's growth objective but introduces higher volatility. Diversifying into other asset classes could potentially reduce risk and provide more stability. Investors should consider their risk tolerance and investment horizon when evaluating this allocation.

Sectors Info

  • Technology
    26%
  • Financials
    18%
  • Consumer Discretionary
    11%
  • Industrials
    9%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio is diversified across 11 sectors, with technology leading at 25.70%, followed by financial services and consumer cyclicals. This sector allocation provides exposure to various economic cycles and growth opportunities. However, the concentration in technology may increase risk during sector downturns. Balancing sector weights could help mitigate this risk and ensure more consistent returns across different market conditions.

Regions Info

  • North America
    54%
  • Asia Emerging
    15%
  • Europe Developed
    11%
  • Asia Developed
    9%
  • Japan
    4%
  • Africa/Middle East
    3%
  • Latin America
    2%
  • Australasia
    1%
  • Europe Emerging
    1%

Geographically, the portfolio is predominantly invested in North America (53.80%), followed by Asia Emerging and Europe Developed. This distribution offers exposure to both established and growing economies, enhancing diversification. While the focus on North America provides stability, increasing exposure to other regions could capture growth from emerging markets and reduce geographic concentration risk. A more balanced geographic allocation might improve resilience against regional economic downturns.

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 can be optimized by aligning it closer to the efficient frontier, where risk is minimized for a given level of return. With the current risk level, a more efficient portfolio could achieve a 13.10% expected return, higher than the current portfolio's. Investors can achieve a riskier or more conservative stance by adjusting allocations along the efficient frontier. However, focusing on diversification and correlation may offer more immediate benefits before pursuing optimization.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • Xtrackers MSCI Emerging Markets UCITS ETF 1C 0.18%
  • Weighted costs total (per year) 0.19%

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