A globally diversified ETF portfolio with strong growth potential and moderate risk

Report created on Jun 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is entirely invested in the Vanguard FTSE All-World UCITS ETF, providing broad exposure to global equities. With a single ETF making up 100% of the portfolio, it simplifies management but may limit flexibility. Compared to a typical balanced portfolio, which often includes a mix of stocks, bonds, and other assets, this portfolio is heavily weighted towards equities. This concentration can lead to higher volatility, but it also offers significant growth potential. Diversification within the ETF itself is strong, covering multiple sectors and regions, which helps to mitigate some risks associated with a single-asset portfolio.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 12.88%. This rate suggests robust growth compared to many traditional savings or bond investments. However, it's important to note the maximum drawdown of -33.45%, indicating the potential for significant short-term losses. Such volatility is typical for equity-heavy portfolios and highlights the importance of a long-term investment horizon. While past performance is not indicative of future results, it provides a useful benchmark for assessing risk tolerance and potential returns.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, reflecting the inherent uncertainty in financial markets. The simulations predict a 13.85% annualized return, with a 5th percentile outcome of 80.93% and a 67th percentile outcome of 600.47%. This range underscores the portfolio's potential for both significant gains and losses. While simulations provide insights, they rely on historical data and assumptions, which may not fully capture future market conditions. Investors should consider these projections as one of many tools for decision-making.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely allocated to stocks, with minimal exposure to other asset classes. This heavy stock allocation aligns with the goal of achieving high growth but increases exposure to market volatility. Compared to a more diversified asset allocation that includes bonds or real assets, this portfolio may experience larger swings in value. For investors seeking to balance growth with stability, incorporating additional asset classes could provide a buffer against market downturns, though it might reduce potential returns.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation is well-diversified, with significant exposure to technology (25.65%), financial services (16.45%), and healthcare (10.53%). This spread aligns closely with global benchmarks, indicating a balanced approach to sector risk. However, the high allocation to technology could lead to increased volatility, especially during periods of regulatory changes or economic shifts. Investors should monitor sector trends and consider rebalancing if one sector becomes disproportionately large, ensuring alignment with personal risk tolerance and market conditions.

Regions Info

  • North America
    66%
  • 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, which comprises 65.54% of the allocation. This concentration provides exposure to a mature and historically stable market but may limit benefits from emerging markets' growth. The portfolio's global reach, including developed Europe, Asia, and emerging markets, offers diversification benefits, reducing reliance on any single economy. Investors might consider increasing exposure to underrepresented regions to enhance diversification further, potentially capturing growth from less mature markets.

Ongoing product costs Info

  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.22%

The total expense ratio (TER) of 0.22% is relatively low, which is beneficial for long-term returns as it minimizes the drag on performance. Low costs are a hallmark of Vanguard's investment philosophy, allowing investors to keep more of their returns. While costs are already optimized, investors should periodically review them to ensure they remain competitive, particularly if additional funds or assets are considered for inclusion in the portfolio.

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