A growth-focused portfolio with strong US exposure but limited geographic diversification

Report created on Dec 25, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with a 60% allocation to the Vanguard S&P 500 UCITS ETF and 40% to the Vanguard FTSE All-World UCITS ETF. This composition indicates a strong focus on equity markets, with a significant emphasis on large-cap stocks. Compared to a typical balanced portfolio, this allocation is heavily skewed towards equities, which may enhance growth potential but also increase volatility. To align more closely with a balanced benchmark, consider incorporating fixed-income or alternative assets to reduce risk and enhance diversification.

Growth Info

The portfolio has demonstrated strong historic performance, with a CAGR of 14.18%, significantly outperforming many traditional benchmarks. However, it has also experienced a maximum drawdown of -33.87%, indicating substantial volatility during downturns. This performance profile suggests that while the portfolio can deliver impressive returns, it may also expose investors to significant risk during market corrections. Understanding the trade-off between risk and return is crucial for investors considering similar equity-heavy portfolios.

Projection Info

The Monte Carlo simulation, a method using historical data to predict future outcomes, projects an annualized return of 14.72% for this portfolio. With 1,000 simulations, the 5th percentile shows a 96.37% return, while the 67th percentile suggests a 667.08% return. These projections highlight the potential for both modest and substantial gains, but it's essential to remember that past data cannot guarantee future results. Investors should be prepared for a range of outcomes, especially given the portfolio's high-risk profile.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible allocation to other asset classes. This singular focus on equities may amplify growth potential but could also increase exposure to market volatility. Compared to a diversified benchmark, which might include bonds or real estate, this portfolio lacks asset class diversification. Introducing other asset classes could help mitigate risk and stabilize returns, particularly during equity market downturns.

Sectors Info

  • Technology
    30%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    3%
  • Real Estate
    2%

Sector-wise, the portfolio is heavily concentrated in technology, making up nearly 30% of the allocation. This concentration aligns with recent trends where tech has driven market growth but also exposes the portfolio to sector-specific risks, like regulatory changes or tech stock corrections. Diversifying across more sectors could reduce this risk. The current sector distribution is well-aligned with many growth-focused benchmarks, but balancing it further could enhance stability.

Regions Info

  • North America
    87%
  • Europe Developed
    6%
  • Japan
    2%
  • Asia Emerging
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly exposed to North America, accounting for over 86% of the allocation. This concentration may limit diversification benefits and expose the portfolio to regional risks, such as economic downturns or policy changes in the US. Compared to global benchmarks, this portfolio underrepresents regions like Europe and emerging markets. Expanding geographic exposure can help mitigate regional risks and capture growth opportunities in diverse markets.

Redundant positions Info

  • Vanguard FTSE All-World UCITS ETF USD Accumulation
    Vanguard S&P 500 UCITS Acc
    High correlation

The portfolio's assets are highly correlated, meaning they tend to move in the same direction. This high correlation suggests limited diversification benefits, as downturns in one asset are likely to affect the other similarly. While correlated assets can boost returns in upward markets, they may also amplify losses during downturns. To enhance diversification, consider incorporating assets with lower correlation to the current holdings, which can provide more stable returns.

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.

This portfolio could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. However, given the high correlation between assets, diversification benefits are limited. Before optimizing, consider reducing overlap by introducing less correlated assets. This approach can improve the portfolio's efficiency, balancing risk and return more effectively. Remember, efficiency focuses on maximizing returns for a given risk level, not necessarily diversification.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.13%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.13%. This low-cost structure supports better long-term performance by minimizing the drag on returns. Compared to many actively managed funds, these costs are impressively low, aligning with best practices for cost-efficiency. Maintaining this focus on low fees is advantageous, but always review for potential lower-cost alternatives as part of regular portfolio maintenance.

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