A cautious and broadly diversified portfolio with a strong focus on North American equities

Report created on Jan 20, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of ETFs, with a significant allocation towards the Vanguard S&P 500 UCITS Acc (33.14%) and iShares Core MSCI World UCITS ETF USD (Acc) (24.79%). This composition suggests a strong emphasis on large-cap equities, particularly in the U.S. market. The inclusion of gold (10.06%) adds a layer of diversification. Compared to typical benchmarks, this portfolio leans heavily on U.S. equities, which may provide stability but could also limit exposure to other growing markets. To enhance diversification, consider incorporating more non-U.S. equities or alternative asset classes.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 13.85%, outperforming many benchmarks. A hypothetical initial investment would have grown significantly, albeit with a maximum drawdown of -13.13%. This indicates periods of volatility but overall resilience. While past performance is not indicative of future results, this historical strength suggests a robust strategy. To maintain this performance, regularly review the asset allocation to ensure it aligns with market conditions and personal investment goals.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential outcomes, shows promising results for this portfolio. With 1,000 simulations, 999 resulted in positive returns, and the median (50th percentile) projected value is 434% of the initial investment. This suggests a high likelihood of positive growth, though it's important to remember that simulations are not guarantees. To potentially increase returns, consider rebalancing the portfolio to optimize for risk and return, as suggested by the Efficient Frontier analysis.

Asset classes Info

  • Stocks
    90%
  • Other
    10%

The portfolio's asset allocation is heavily weighted towards stocks (90%), with a minor allocation to other assets like gold (10%). This stock-heavy allocation aligns with a growth-focused strategy but may expose the portfolio to equity market volatility. Compared to benchmarks, the lack of bonds or cash could increase risk during market downturns. To mitigate this, consider introducing a small percentage of fixed-income securities or cash equivalents to provide stability and liquidity.

Sectors Info

  • Technology
    23%
  • Financials
    16%
  • Consumer Discretionary
    10%
  • Health Care
    8%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is fairly balanced, with technology (23%) and financial services (16%) leading the way. This composition aligns with global benchmarks but may expose the portfolio to sector-specific risks, such as tech volatility during interest rate hikes. The presence of consumer cyclicals (10%) and healthcare (8%) offers some diversification. To further balance the sector exposure, consider increasing allocations to underrepresented sectors like utilities or real estate, which can provide stability and income.

Regions Info

  • North America
    67%
  • Asia Emerging
    13%
  • Europe Developed
    6%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily tilted towards North America (67%), with limited exposure to other regions. This concentration could benefit from the stability of the U.S. market but may miss out on growth opportunities in emerging markets. The small allocations to Asia Emerging (13%) and Europe Developed (6%) provide some diversification. To enhance geographic balance, consider increasing exposure to regions like Latin America or Africa, which may offer higher growth potential.

Market capitalization Info

  • Mega-cap
    38%
  • Large-cap
    30%
  • Mid-cap
    13%
  • Small-cap
    6%
  • Micro-cap
    3%

The portfolio's market capitalization allocation is skewed towards mega (38%) and big (30%) companies, reflecting a focus on established, stable firms. This can provide reliability but may limit growth potential compared to smaller-cap stocks. Medium (13%) and small (6%) caps offer some diversification, but further increasing exposure to small and micro caps could enhance growth opportunities. Balancing market caps can help capture gains across different economic cycles.

Redundant positions Info

  • iShares Dow Jones Global Sustainability Screened UCITS ETF USD (Acc)
    iShares Core MSCI World UCITS ETF USD (Acc)
    Vanguard S&P 500 UCITS Acc
    High correlation

The portfolio contains highly correlated assets, particularly among the iShares Dow Jones Global Sustainability Screened UCITS ETF, iShares Core MSCI World UCITS ETF, and Vanguard S&P 500 UCITS Acc. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. To reduce risk, consider diversifying into less correlated assets or sectors. This could improve resilience during market downturns and enhance overall portfolio performance.

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 be optimized using the Efficient Frontier, which helps find the best risk-return ratio for the current assets. By adjusting the allocation, the expected return could increase to 15.76% with a risk level of 9.68%. This optimization suggests there is room to enhance returns without significantly increasing risk. Consider rebalancing the portfolio to achieve this optimal mix, focusing on reducing overlap among highly correlated assets to improve diversification.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • iShares Dow Jones Global Sustainability Screened UCITS ETF USD (Acc) 0.60%
  • iShares MSCI India UCITS ETF USD Acc 0.65%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Xtrackers MSCI Malaysia UCITS ETF 1C 0.50%
  • SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc EUR 0.30%
  • Weighted costs total (per year) 0.24%

The portfolio's total expense ratio (TER) is relatively low at 0.24%, which is beneficial for long-term returns as lower costs mean more of your money is working for you. This aligns well with industry best practices for cost efficiency. However, some individual ETFs, like the iShares MSCI India UCITS ETF (0.65%), have higher costs. Regularly review these expenses and consider lower-cost alternatives to maximize net returns without compromising on diversification or performance.

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