A balanced portfolio with global exposure and a focus on diversified equity ETFs

Report created on Jan 4, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of two ETFs, each making up 50% of the total allocation. Both ETFs are globally diversified, focusing on equities, which is typical for a balanced investment strategy. The equal weighting of the ETFs suggests a straightforward approach to diversification, minimizing concentration risk in any single fund. However, this composition also indicates a lack of variety in asset types, as both investments are similar in nature. To enhance diversification, consider incorporating different asset classes, such as bonds or real estate, which can provide stability and income during volatile market periods.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 12.76%, which is commendable for a balanced strategy. The maximum drawdown of -33.97% highlights the potential volatility that can occur, especially during market downturns. This performance is indicative of a portfolio that captures significant market upswings but also experiences notable declines. Investors should be aware that past performance does not guarantee future results. To potentially reduce drawdowns, consider adding more defensive assets that can provide stability during turbulent times.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with the 5th percentile at 94.17% and the 67th percentile at 582.4% of the initial investment. This simulation uses historical data to estimate future performance, showing a median return of 400.69%. While the annualized return of 13.34% is promising, it's important to remember that these projections are not certain. They offer a probabilistic view of future performance. To prepare for different market conditions, regularly review and adjust your portfolio to align with changing financial goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.97% allocated to stocks. This concentration in a single asset class enhances growth potential but also increases exposure to market volatility. While equities are essential for growth, incorporating other asset classes like bonds or alternative investments could provide balance and reduce risk. Diversification across asset classes can help mitigate losses during equity market downturns, offering a more stable return profile over the long term.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Industrials
    11%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    3%

The sector allocation is diverse, with significant exposure to technology (25.11%), financial services (16.05%), and industrials (10.55%). This distribution aligns well with global benchmarks, providing a balanced exposure to various economic sectors. However, the high concentration in technology may lead to increased volatility, particularly during periods of regulatory changes or interest rate hikes. To manage this risk, consider diversifying further into sectors that may perform well in different economic environments, such as healthcare or consumer defensives.

Regions Info

  • North America
    66%
  • Europe Developed
    14%
  • Japan
    6%
  • Asia Emerging
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The geographic allocation is heavily skewed towards North America, which accounts for 65.96% of the portfolio. While this region offers stability and growth, it also exposes the portfolio to regional risks. The underrepresentation of emerging markets and other regions like Latin America and Africa/Middle East could limit the potential for higher returns from these areas. To enhance geographic diversification, consider increasing exposure to underrepresented regions, which can provide growth opportunities and reduce dependence on North American markets.

Redundant positions Info

  • SSgA SPDR ETFs Europe I Public Limited Company - SPDR MSCI ACWI IMI UCITS ETF
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    High correlation

The two ETFs in the portfolio are highly correlated, meaning they tend to move in tandem. This correlation limits the diversification benefits, as both assets are likely to react similarly to market events. While correlation can be beneficial during market upswings, it may not provide the desired protection during downturns. To improve diversification, consider adding assets with lower correlation to the existing holdings. This approach can help smooth out returns and reduce overall portfolio risk.

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 using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. Currently, the high correlation between the ETFs suggests limited diversification benefits. By adjusting the allocation and potentially incorporating assets with different risk-return profiles, the portfolio could achieve a better balance between risk and return. This optimization process helps ensure that the portfolio is not only diversified but also positioned to maximize returns for the level of risk taken.

Ongoing product costs Info

  • SSgA SPDR ETFs Europe I Public Limited Company - SPDR MSCI ACWI IMI UCITS ETF 0.40%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.31%

The portfolio's total expense ratio (TER) is 0.31%, which is competitive and supports long-term growth. Lower costs mean more of your investment's returns are retained, enhancing compounding over time. This cost efficiency is a positive aspect of the portfolio, aligning with best practices for cost management. Regularly reviewing and comparing fund fees can ensure that the portfolio remains cost-effective, maximizing net returns. Consider exploring other low-cost options if available, to further reduce expenses.

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