A balanced portfolio with significant US exposure and moderate diversification

Report created on Dec 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with ETFs representing major indices like the NASDAQ-100 and S&P 500 making up 62% of the allocation. The remainder is split between US equity income, UK FTSE 100, and China large-cap ETFs. The focus on equities suggests a growth-oriented strategy, albeit with a regional concentration. A balanced approach is evident, but the portfolio could benefit from including other asset classes like bonds to reduce volatility. Diversifying across asset classes can help manage risk and provide more stable returns over time.

Growth Info

A hypothetical investment in this portfolio has historically yielded a strong compound annual growth rate (CAGR) of 15.33%, albeit with a maximum drawdown of -23.73%. This indicates significant growth potential but also highlights periods of substantial losses. While past performance is not indicative of future results, understanding these dynamics can help set realistic expectations. Investors should prepare for potential downturns by considering their risk tolerance and ensuring that they have a diversified portfolio to cushion against market volatility.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns. With 1,000 simulations, the portfolio's annualized return averaged 13.14%, with a 5th percentile outcome of 13.34% and a 67th percentile of 513.79%. While these projections provide a range of possible outcomes, they are not guarantees. It's crucial to understand that simulations rely on historical data, which may not fully capture future market conditions. Regularly reviewing and adjusting the portfolio in response to changing market dynamics is recommended.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly allocated to stocks, accounting for over 99% of its composition. This heavy reliance on equities can drive significant growth but also introduces heightened volatility. A more balanced asset class allocation, including bonds or alternative investments, could enhance stability and provide a hedge against market downturns. Diversifying asset classes can help in achieving a smoother return profile and reducing the overall risk of the portfolio.

Sectors Info

  • Technology
    28%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Telecommunications
    10%
  • Health Care
    9%
  • Consumer Staples
    7%
  • Industrials
    6%
  • Energy
    6%
  • Utilities
    3%
  • Basic Materials
    3%
  • Real Estate
    2%

The sector allocation is led by technology at 27.74%, followed by financial services and consumer cyclicals. This concentration in tech reflects a bet on growth sectors, which can be rewarding but also volatile. A more even distribution across sectors can mitigate sector-specific risks and provide a buffer during downturns in any particular industry. Consider adjusting the sector weights to achieve a more balanced exposure, which can help in managing risk and capturing opportunities across different economic cycles.

Regions Info

  • North America
    76%
  • Europe Developed
    15%
  • Asia Emerging
    8%

Geographically, the portfolio is heavily skewed towards North America, comprising 76.2% of the allocation. While this provides exposure to a mature market with robust growth potential, it also exposes the portfolio to regional risks. Expanding geographic diversification can help mitigate these risks and tap into growth opportunities in emerging markets. Consider increasing exposure to underrepresented regions to enhance diversification and reduce the impact of regional economic fluctuations on the portfolio.

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's current asset allocation can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. By adjusting the weights of existing assets, the portfolio can potentially achieve higher returns for the same level of risk, or maintain returns while reducing risk. This optimization focuses solely on the current holdings, aiming to enhance efficiency without necessarily increasing diversification. Regularly reviewing the portfolio's risk-return profile can help in maintaining an optimal balance that aligns with investment objectives.

Dividends Info

  • Vanguard FTSE 100 UCITS GBP Acc 0.60%
  • Weighted yield (per year) 0.09%

The portfolio's dividend yield is relatively low at 0.09%, primarily due to its focus on growth-oriented ETFs. While dividends can provide a steady income stream, the current yield suggests a preference for capital appreciation over income generation. Investors seeking regular income might consider reallocating a portion of the portfolio to dividend-focused assets. Balancing growth and income can provide a more comprehensive return strategy, catering to both immediate cash flow needs and long-term capital growth.

Ongoing product costs Info

  • WisdomTree US Equity Income UCITS ETF - Acc 0.29%
  • Invesco EQQQ NASDAQ-100 UCITS ETF 0.35%
  • iShares China Large Cap UCITS 0.74%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE 100 UCITS GBP Acc 0.10%
  • Weighted costs total (per year) 0.25%

The portfolio's total expense ratio (TER) is 0.25%, with individual ETF costs ranging from 0.07% to 0.74%. While relatively low, these costs can add up over time, impacting overall returns. Reducing expenses by selecting lower-cost funds or negotiating management fees can enhance long-term returns. Regularly reviewing and optimizing investment costs is a prudent strategy to maximize net returns, ensuring that the portfolio remains cost-effective and aligned with investment goals.

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