A balanced portfolio with strong North American focus and high tech sector exposure
Report created on Jan 6, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
SP SPDR® MSCI World UCITS ETF
SPPW - IE00BFY0GT14 40.00% -
SX iShares Core S&P 500 UCITS ETF USD (Acc)
SXR8 - IE00B5BMR087 40.00% -
AM Amundi MSCI Emerging Markets UCITS
AMEM - LU1681045370 20.00%
The portfolio consists of three ETFs, with a 40% allocation each to SPDR® MSCI World UCITS ETF and iShares Core S&P 500 UCITS ETF, and 20% to Amundi MSCI Emerging Markets UCITS. This composition leans heavily towards developed markets, particularly the U.S. This is a common strategy for balanced portfolios, aiming for growth through global equity exposure. However, the portfolio could benefit from more asset class diversification beyond equities, like bonds or real estate, to reduce risk. Adding these could provide stability during market volatility, aligning with the balanced risk classification.
Growth
The portfolio has demonstrated a strong historical performance with a CAGR of 13.32%. This indicates a robust growth rate over time, surpassing many benchmarks. However, it also experienced a significant maximum drawdown of -33.18%, highlighting potential volatility. While past performance is not an indicator of future results, it suggests the portfolio has weathered market fluctuations well. Investors should be prepared for similar volatility in the future and consider strategies to mitigate drawdowns, such as increasing cash or bond allocations.
Projection
Monte Carlo simulations, which use historical data to predict future outcomes, show a 12.5% annualized return across 1,000 simulations. This suggests a favorable outlook, with 985 simulations yielding positive returns. However, it's crucial to remember that these projections are not guarantees, as they rely on past data. The 5th percentile projection of 37.75% growth indicates potential downside, while the 67th percentile of 485.97% shows significant upside. Investors should weigh these outcomes against their risk tolerance and consider diversifying to mitigate potential risks.
Asset classes
- Stocks 100%
The portfolio is heavily weighted in stocks at 99.89%, with minimal cash and other asset classes. This indicates a strong focus on equity growth, which can lead to high returns but also increases exposure to market volatility. A more diversified asset allocation, including bonds or alternative investments, could reduce risk and provide stability. By balancing equity exposure with other asset classes, investors can achieve a more stable return profile, which is particularly important for those with a balanced risk tolerance.
Sectors
- Technology 29%
- Financials 16%
- Consumer Discretionary 11%
- Health Care 9%
- Telecommunications 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
The portfolio has a notable 28.71% allocation to the technology sector, followed by financial services and consumer cyclicals. This tech-heavy focus can drive growth but also introduces higher volatility, especially during periods of interest rate changes. Other sectors are more evenly distributed, providing a degree of balance. To further mitigate sector-specific risks, investors might consider increasing exposure to defensive sectors like healthcare or utilities, which typically offer more stability during economic downturns.
Regions
- North America 71%
- Asia Emerging 10%
- Europe Developed 6%
- Asia Developed 6%
- Japan 2%
- Africa/Middle East 2%
- Latin America 1%
- Australasia 1%
Geographic exposure is predominantly in North America at 70.52%, with limited diversification across other regions. This concentration can lead to increased risk if the U.S. market underperforms. Although exposure to Asia Emerging and Europe Developed provides some diversification, increasing allocations to underrepresented regions like Latin America or Africa/Middle East could enhance global balance. This adjustment would align with a more diversified approach, potentially reducing geographic risk and capturing growth opportunities in emerging markets.
Redundant positions
-
High correlationiShares Core S&P 500 UCITS ETF USD (Acc)SPDR® MSCI World UCITS ETF
The portfolio's assets, particularly the iShares Core S&P 500 UCITS ETF and SPDR® MSCI World UCITS ETF, are highly correlated. This means they tend to move in the same direction, limiting diversification benefits. In a market downturn, this correlation can lead to amplified losses. To enhance diversification, consider replacing one of these with an asset that has a lower correlation to the existing holdings. This could help spread risk and improve the portfolio's resilience against market fluctuations.
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.
While the current portfolio is well-structured, optimizing it using the Efficient Frontier could enhance the risk-return balance. This involves adjusting the allocation of existing assets to achieve the best possible trade-off between risk and return. By focusing on the Efficient Frontier, investors can ensure their portfolio is positioned for maximum efficiency, given their risk tolerance. It's important to note that optimization does not necessarily mean adding new assets but rather reallocating within the current selection to achieve optimal performance.
Ongoing product costs
- Amundi MSCI Emerging Markets UCITS 0.20%
- SPDR® MSCI World UCITS ETF 0.12%
- iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
- Weighted costs total (per year) 0.14%
The portfolio maintains a low Total Expense Ratio (TER) of 0.14%, which is commendable. Low costs are crucial for maximizing long-term returns, as they minimize the drag on performance. This cost efficiency aligns well with best practices in portfolio management. However, it's essential to periodically review these costs to ensure they remain competitive. Investors should also explore opportunities to further reduce expenses, such as considering alternative low-cost funds or ETFs that offer similar exposure.
What next?
Create your own report?
Join our community!
The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.
Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.
Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.
Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.
By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.
Instrument logos provided by Elbstream.
Help us improve Insightfolio
Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey