A cautious portfolio with a focus on quality income ETFs and moderate diversification

Report created on Jun 23, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio comprises three ETFs, with a strong emphasis on equity investments. Approximately 80% of the portfolio is allocated to two equity ETFs, while 20% is in a bond ETF. This mix leans towards equities, which is slightly aggressive for a cautious risk profile. Typically, cautious portfolios might balance equities and bonds more evenly. This structure may expose the portfolio to higher volatility than expected for its risk classification. Consider increasing bond exposure to align more closely with a cautious investment strategy, potentially providing more stability.

Growth Info

Historically, the portfolio has delivered a commendable CAGR of 11.42%, indicating robust growth over time. However, the maximum drawdown of nearly 30% suggests significant volatility periods. This performance exceeds typical cautious portfolio expectations, which often prioritize stability over high returns. While past performance is not indicative of future results, it highlights the portfolio's potential for substantial gains. To mitigate drawdowns, consider diversifying further or adjusting the asset mix to include more stable, lower-risk investments.

Projection Info

Forward projections using Monte Carlo simulations show promising outcomes, with a median expected return of 245.11%. This method uses historical data to simulate potential future returns, offering a range of possibilities. However, it's important to remember that such simulations cannot predict future market conditions. The high potential returns suggest the portfolio could perform well, but the wide range of outcomes also indicates uncertainty. To improve predictability, consider refining asset allocation or exploring alternative investment strategies to reduce risk.

Asset classes Info

  • Stocks
    80%
  • Bonds
    20%

The portfolio is heavily weighted towards stocks, with nearly 80% in equities and about 20% in bonds. This allocation may not fully align with a cautious investor's typical preference for more balanced exposure to mitigate risk. Stocks offer growth potential, but bonds provide stability and income, which can be crucial for risk management. Consider increasing bond holdings to enhance diversification and reduce overall portfolio volatility, aligning more closely with cautious investment goals.

Sectors Info

  • Technology
    26%
  • Financials
    12%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Industrials
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio is notably concentrated in the technology sector, representing over 25% of total holdings. Such concentration can lead to increased volatility, especially during economic shifts affecting tech companies. While tech stocks have driven impressive returns, they also pose higher risks in uncertain markets. A more balanced sector allocation could enhance stability and reduce sector-specific risks. Explore opportunities to diversify into underrepresented sectors, potentially improving resilience against market fluctuations.

Regions Info

  • North America
    69%
  • Europe Developed
    8%
  • Japan
    2%
  • Australasia
    1%

With over 69% exposure to North American markets, the portfolio is heavily weighted towards this region. While North America has been a strong performer, this concentration may limit diversification benefits. Other regions, like Europe or Asia, could provide growth opportunities and risk mitigation. Balancing geographic exposure can help protect against regional economic downturns. Consider reallocating some assets to diversify geographically, enhancing the portfolio's ability to weather global market changes.

Redundant positions Info

  • Fidelity UCITS SICAV - Fidelity US Quality Income UCITS ETF
    Fidelity Global Quality Income UCITS ETF Inc
    High correlation

The portfolio's two main equity ETFs show high correlation, meaning they tend to move in the same direction. This limits diversification benefits and can amplify risk during market downturns. Diversification aims to spread risk by holding assets that don't move together. To improve diversification, consider replacing one of the highly correlated ETFs with a different equity fund that offers unique market exposure or characteristics, potentially reducing 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 could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. Currently, the high correlation between equity ETFs suggests room for improvement by adjusting asset weights. Optimization doesn't guarantee diversification but seeks to maximize returns for a given risk level. Consider rebalancing the portfolio to enhance efficiency, potentially improving returns without significantly increasing risk.

Dividends Info

  • iShares Global Aggregate Bond UCITS Dist 1.50%
  • Fidelity Global Quality Income UCITS ETF Inc 2.40%
  • Fidelity UCITS SICAV - Fidelity US Quality Income UCITS ETF 0.50%
  • Weighted yield (per year) 1.46%

The portfolio's overall dividend yield stands at 1.46%, primarily driven by the equity ETFs. Dividends provide a steady income stream, which can be particularly appealing for cautious investors seeking regular returns. However, the yield is relatively modest, reflecting the portfolio's growth focus. To enhance income potential, consider exploring higher-yielding investments or dividend-focused funds, which could provide more consistent cash flow, aligning with a cautious investor's goals.

Ongoing product costs Info

  • iShares Global Aggregate Bond UCITS Dist 0.10%
  • Fidelity Global Quality Income UCITS ETF Inc 0.45%
  • Fidelity UCITS SICAV - Fidelity US Quality Income UCITS ETF 0.25%
  • Weighted costs total (per year) 0.30%

The portfolio's total expense ratio (TER) is 0.3%, which is competitively low. Lower costs can significantly enhance long-term returns, as fees compound over time. This cost efficiency is a positive aspect, aligning well with best practices for maximizing investment returns. Maintaining a low-cost structure should remain a priority. Regularly review expenses and explore opportunities to replace higher-cost assets with more cost-effective options without compromising investment quality.

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