A balanced portfolio heavily weighted towards North American equities with a tech concentration

Report created on Jan 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of four ETFs, with iShares MSCI ACWI and iShares Core S&P 500 each making up 35%, iShares NASDAQ 100 at 25%, and Vanguard LifeStrategy 80% Equity at 5%. This composition leans heavily towards equities, particularly U.S. stocks, which is typical for a balanced profile. While this allocation provides exposure to global markets, it may lack diversification in terms of asset classes. A more diversified portfolio might include bonds or alternative investments to mitigate risk during market downturns.

Growth Info

Historically, the portfolio has performed well, boasting a Compound Annual Growth Rate (CAGR) of 15.94%. This indicates strong growth, particularly during bullish market phases. However, it's important to note the maximum drawdown of -19.2%, which highlights vulnerability during periods of market stress. Comparing this to benchmarks like the S&P 500 can provide context, but remember that past performance doesn't guarantee future results. Consider balancing high-growth assets with more stable ones to reduce potential drawdowns.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest an optimistic outlook with a median return of 669.62%. However, the reliance on past data means these projections have limitations. While the simulations show a high likelihood of positive returns, it's wise to maintain a diversified approach to cushion against unforeseen market shifts. Regularly reviewing and adjusting the portfolio can help align it with evolving market conditions and personal investment goals.

Asset classes Info

  • Stocks
    99%
  • Bonds
    1%

The portfolio is overwhelmingly invested in stocks, with nearly 99% allocated to equities. This heavy stock allocation can drive growth but also increases exposure to market volatility. A balanced portfolio typically includes a mix of asset classes like bonds or real estate to reduce risk. Consider integrating these to achieve a more diversified asset allocation, which may offer stability and protect against equity market fluctuations.

Sectors Info

  • Technology
    35%
  • Consumer Discretionary
    12%
  • Financials
    11%
  • Telecommunications
    11%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

Technology dominates the sector allocation at over 35%, followed by consumer cyclicals and financial services. This tech-heavy orientation can lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. While tech has been a high-performing sector, diversifying into other sectors like healthcare or industrials could provide more balance and reduce the impact of sector-specific downturns. Evaluating sector trends can help in making informed adjustments.

Regions Info

  • North America
    87%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographic exposure is concentrated in North America, accounting for nearly 87% of the portfolio. This concentration may limit the benefits of geographic diversification. While North American markets have historically performed well, adding exposure to regions like Europe or Asia could enhance diversification and reduce regional risk. Consider exploring opportunities in underrepresented areas to achieve a more balanced global allocation, which can mitigate the impact of regional economic downturns.

Redundant positions Info

  • Vanguard LifeStrategy 80% Equity UCITS ETF (EUR) Accumulating
    iShares MSCI ACWI UCITS ETF
    iShares Core S&P 500 UCITS ETF USD (Acc)
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard LifeStrategy, iShares MSCI ACWI, and iShares Core S&P 500 ETFs. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could lead to increased risk. To enhance diversification, consider replacing some correlated assets with those that have historically shown lower correlation, thereby potentially reducing overall portfolio volatility.

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.

Before optimizing the portfolio on the Efficient Frontier, address the issue of overlapping assets. The high correlation among some ETFs limits diversification benefits and could hinder risk-return efficiency. By reducing overlap, the portfolio can be better positioned for optimization, potentially achieving a more favorable risk-return balance. Remember, optimization focuses on existing assets, so consider these changes to enhance the portfolio's efficiency.

Ongoing product costs Info

  • iShares MSCI ACWI UCITS ETF 0.20%
  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • iShares NASDAQ 100 UCITS ETF USD (Acc) 0.36%
  • Vanguard LifeStrategy 80% Equity UCITS ETF (EUR) Accumulating 0.25%
  • Weighted costs total (per year) 0.21%

The portfolio's total expense ratio (TER) is 0.21%, which is relatively low and beneficial for long-term performance. Lower costs mean more of your returns are kept, enhancing compounding effects over time. However, it's always wise to periodically review costs and explore alternatives that may offer similar exposure at even lower fees. Keeping costs in check remains a fundamental strategy for maximizing net returns over the investment horizon.

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