Balanced Risk Portfolio with Strong Technology Focus and Broad Geographic Diversification

Report created on Dec 4, 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 consists of five ETFs with a strong focus on U.S. technology, making up over a third of the total allocation. The Vanguard FTSE All-World ETF provides global exposure, while the VanEck Dividend Leaders ETF adds a dividend component. The iShares Digital Security and MSCI EM ETFs provide exposure to digital security and emerging markets. The overall allocation is heavily weighted towards stocks, with minimal cash and other assets. This composition suggests a growth-oriented strategy with a broad diversification across sectors and geographies, albeit with a notable concentration in technology.

Growth Info

The historical performance of the portfolio shows a commendable compound annual growth rate (CAGR) of 15.94%, indicating strong past returns. However, the maximum drawdown of -32.63% highlights potential volatility. This performance suggests that while the portfolio has the potential for significant growth, it also carries risks associated with market downturns. The days that make up 90% of returns being only 26 indicates a concentration of gains in a few periods, which is common in equity-heavy portfolios. Continuous monitoring and periodic rebalancing could help manage the volatility and sustain growth.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This simulation provides a range of possible outcomes, with the 5th percentile predicting a 76.27% return and the 67th percentile suggesting a 694.6% gain. The median outcome is a 471.49% return, indicating a wide range of potential future performances. The annualized return across all simulations is 14.83%, which aligns with the historical performance. This analysis underscores the portfolio's potential for growth, but also the inherent uncertainty and risk in future market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for nearly 100% of the allocation. This heavy equity exposure suggests a focus on capital appreciation rather than income or capital preservation. Such a strategy is appropriate for investors with a higher risk tolerance who are seeking long-term growth. However, the lack of significant allocation to bonds or other asset classes could increase vulnerability to market volatility. Diversifying into other asset classes like bonds could help reduce risk and provide more stability during market downturns.

Sectors Info

  • Technology
    55%
  • Financials
    13%
  • Health Care
    6%
  • Industrials
    6%
  • Consumer Discretionary
    5%
  • Telecommunications
    4%
  • Energy
    3%
  • Consumer Staples
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation reveals a significant concentration in technology, which comprises over 55% of the portfolio. This focus reflects a belief in the continued growth of the tech sector but also introduces sector-specific risks. Financial services and healthcare are the next largest sectors, providing some diversification. However, the remaining sectors have relatively small allocations, which may limit the portfolio's ability to benefit from growth in other industries. Balancing the sector allocations could help mitigate risks associated with overexposure to technology.

Regions Info

  • North America
    67%
  • Europe Developed
    13%
  • Asia Emerging
    8%
  • Asia Developed
    5%
  • Japan
    4%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America, which constitutes 67% of the allocation. This concentration provides exposure to the U.S. market but could also introduce risks related to regional economic downturns. The portfolio does include some diversification with allocations in Europe, Asia, and other regions. However, the limited exposure to emerging markets and other geographies could be a missed opportunity for growth. Increasing geographic diversification could help spread risk and capture growth opportunities in other parts of the world.

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 broadly diversified but could benefit from optimization along the efficient frontier. By adjusting the asset allocation, it can achieve a better balance between risk and return. Moving towards more bonds and less equities could make the portfolio more conservative, reducing volatility. Conversely, increasing equity exposure could enhance potential returns but also increase risk. Before optimizing, it's important to assess whether the current risk level aligns with the investor's goals and risk tolerance. This strategic adjustment could help in achieving desired investment outcomes.

Dividends Info

  • VanEck Morningstar Developed Markets Dividend Leaders UCITS ETF 3.20%
  • Weighted yield (per year) 0.46%

The portfolio's dividend yield is relatively low at 0.46%, with the VanEck Dividend Leaders ETF being the primary source of income at 3.2%. This suggests a focus on capital appreciation rather than income generation. For investors seeking regular income, the portfolio may not be ideal. However, reinvesting dividends can contribute to long-term growth through compounding. If income generation becomes a priority, considering higher-yielding investments or increasing the allocation to dividend-focused ETFs could be beneficial.

Ongoing product costs Info

  • iShares MSCI EM UCITS ETF USD (Acc) 0.18%
  • iShares Digital Security UCITS ETF USD Acc 0.40%
  • VanEck Morningstar Developed Markets Dividend Leaders UCITS ETF 0.38%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • SPDR S&P U.S. Technology Select Sector UCITS 0.15%
  • Weighted costs total (per year) 0.24%

The portfolio's total expense ratio (TER) is 0.24%, which is relatively low and indicates cost-effective management. The low costs are beneficial for long-term growth as they minimize the drag on returns. Each ETF within the portfolio has reasonable expense ratios, with the SPDR S&P U.S. Technology Select Sector UCITS ETF being the cheapest at 0.15%. Keeping investment costs low is a crucial aspect of optimizing portfolio performance. Continuously monitoring these costs and seeking cost-effective options can further enhance returns over time.

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