A globally diversified equity portfolio with a balanced risk profile
Report created on Feb 23, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VW Vanguard FTSE All-World UCITS
VWRL - IE00B3RBWM25 100.00%
This portfolio is composed entirely of the Vanguard FTSE All-World UCITS ETF, which provides exposure to a broad range of global equities. The ETF covers a wide array of sectors and regions, making it a comprehensive choice for diversification. In comparison to a typical balanced portfolio, which might include bonds or other asset classes, this portfolio is heavily weighted towards equities. This composition is notable because it leans towards growth potential but may also carry higher volatility. For those seeking a balanced approach, considering additional asset classes could help mitigate risk.
Growth
Historically, the portfolio has performed well, boasting a Compound Annual Growth Rate (CAGR) of 12.42%. This impressive growth rate suggests strong past performance, especially when compared to typical benchmarks. However, it's important to note the maximum drawdown of -24.99%, indicating that there have been periods of significant decline. This historical perspective is useful for understanding potential risks and returns. While past performance is not indicative of future results, maintaining awareness of these metrics can guide expectations and risk management strategies.
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns for this portfolio. With 1,000 simulations, the median (50th percentile) projection is a 400.7% increase, while the 5th percentile shows a 112.5% increase. These projections highlight the uncertainty and variability inherent in market investments. While the likelihood of positive returns is high, as evidenced by 999 simulations showing gains, it's essential to remember that these are estimates based on past data. Diversifying further could help manage potential risks.
Asset classes
- Stocks 100%
The portfolio's allocation is entirely in stocks, which is typical for an equity-focused strategy. This singular asset class approach can lead to higher returns but also increases exposure to market volatility. Compared to a more diversified allocation that includes bonds or other asset classes, this portfolio may experience greater fluctuations. While equities are known for their growth potential, adding fixed-income securities or alternative investments could stabilize returns and reduce overall risk, aligning with a balanced investment strategy.
Sectors
- Technology 27%
- Financials 17%
- Consumer Discretionary 11%
- Health Care 10%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
The sector allocation shows a concentration in technology at 27%, followed by financial services and consumer cyclicals. This sectoral distribution is common in global equity portfolios but may lead to higher volatility, especially if specific sectors face downturns. For example, tech-heavy portfolios can be sensitive to interest rate changes. Aligning sector weights more closely with global benchmarks can help mitigate this risk. Regularly reviewing sector performance and trends can ensure the portfolio remains well-positioned for future growth.
Regions
- North America 67%
- Europe Developed 14%
- Asia Emerging 6%
- Japan 6%
- Asia Developed 4%
- Australasia 2%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is heavily weighted towards North America, comprising 67% of the allocation. While this reflects the dominance of U.S. markets, it may limit exposure to growth opportunities in other regions. The underrepresentation of emerging markets could mean missing out on potential high-growth areas. Balancing geographic exposure by increasing allocations to Europe, Asia, and other regions can enhance diversification and reduce reliance on the U.S. market, potentially stabilizing returns against regional economic fluctuations.
Market capitalization
- Mega-cap 47%
- Large-cap 35%
- Mid-cap 17%
The portfolio's market capitalization is tilted towards mega and large-cap stocks, which together make up 82% of the allocation. This focus on larger companies can provide stability and lower risk compared to small-cap stocks, which are typically more volatile. However, it may also limit exposure to the higher growth potential often found in smaller companies. Including a mix of small and medium-cap stocks could enhance growth prospects and offer a more balanced risk-return profile, aligning with a diversified investment strategy.
Dividends
- Vanguard FTSE All-World UCITS 1.00%
- Weighted yield (per year) 1.00%
The portfolio's dividend yield stands at 1.00%, which is relatively modest. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. While growth-focused portfolios may prioritize capital appreciation, including assets with higher dividend yields can enhance income generation. This strategy can be particularly appealing for investors seeking regular cash flow. Evaluating the role of dividends in the overall investment strategy can ensure alignment with financial goals, especially for those nearing retirement.
Ongoing product costs
- Vanguard FTSE All-World UCITS 0.22%
- Weighted costs total (per year) 0.22%
The portfolio's costs are low, with a Total Expense Ratio (TER) of 0.22% for the Vanguard FTSE All-World UCITS ETF. This is advantageous as lower costs can significantly enhance long-term returns by reducing the drag on performance. Compared to actively managed funds, which often have higher fees, this ETF offers a cost-effective way to achieve broad market exposure. Maintaining a focus on low-cost investments is a prudent strategy for optimizing net returns. Regularly reviewing fees ensures they remain competitive and aligned with investment objectives.
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