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A cautious portfolio with strong North American focus and high technology sector exposure

Report created on Dec 23, 2024

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 heavily weighted towards equities, with a significant 45% allocation to the iShares Core S&P 500 UCITS ETF, indicating a strong focus on large-cap U.S. stocks. The inclusion of the Amundi Stoxx Europe 600 ETF and iShares Core MSCI Emerging Markets ETF adds a layer of geographic diversification. Compared to common benchmarks, this composition leans heavily on North American equities. Balancing this with a broader range of regions could enhance diversification, especially given the current focus on developed markets.

Growth Info

Historically, the portfolio has demonstrated a solid performance with a compound annual growth rate (CAGR) of 12.91%. This growth is impressive, especially considering the cautious risk profile. The maximum drawdown of -15.04% indicates moderate volatility, which aligns with a conservative risk tolerance. While past performance is not indicative of future results, maintaining a diversified approach with a focus on risk management has proven beneficial. It would be wise to continue monitoring performance against relevant benchmarks to ensure alignment with investment goals.

Projection Info

Forward projections using Monte Carlo simulations suggest an annualized return of 11.08%, with 983 out of 1,000 simulations showing positive returns. Monte Carlo analysis uses historical data to simulate a range of potential future outcomes, providing a probabilistic view of returns. While useful, these projections are not guarantees and should be considered with caution. The portfolio's expected returns are strong, but continually reviewing assumptions and market conditions is crucial to stay adaptive to changes.

Asset classes Info

  • Stocks
    90%
  • Other
    10%

The portfolio's allocation is predominantly in stocks, accounting for nearly 90% of the total assets, with a smaller allocation to other asset classes like gold. This concentration in equities suggests a growth-oriented strategy, albeit within a cautious risk framework. While equities can drive returns, incorporating a more diverse mix of asset classes could further mitigate risk, especially during market downturns. Exploring fixed income or alternative investments might provide additional stability.

Sectors Info

  • Technology
    35%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Health Care
    7%
  • Industrials
    7%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation reveals a substantial 35% exposure to technology, which may lead to higher volatility, especially during periods of tech sector instability. Other sectors, such as financial services and consumer cyclicals, provide some balance but are less represented. Aligning sector weights more closely with a benchmark like the MSCI World Index could enhance diversification and reduce sector-specific risks. Regularly reassessing sector allocations can help maintain a balanced risk-return profile.

Regions Info

  • North America
    60%
  • Europe Developed
    15%
  • Asia Emerging
    8%
  • Asia Developed
    5%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily skewed towards North America, with nearly 60% exposure. Europe and emerging Asia also contribute, but other regions are underrepresented. This geographic concentration could expose the portfolio to regional economic risks. Broadening exposure to other markets, such as Japan or Latin America, may improve diversification and reduce regional risk. Ensuring a balanced geographic allocation can help buffer against localized economic downturns.

Redundant positions Info

  • iShares Core MSCI Emerging Markets IMI UCITS
    iShares MSCI EM Asia UCITS ETF
    High correlation

The portfolio includes highly correlated assets, particularly within emerging markets, which may limit diversification benefits. Correlation measures how assets move in relation to each other; highly correlated assets tend to move together, reducing the potential for risk mitigation. To enhance diversification, consider replacing or reducing exposure to correlated assets with those that have a lower correlation. This adjustment can help achieve a more balanced risk profile.

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.

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The portfolio can be optimized for better risk-return efficiency by addressing overlapping assets and adjusting allocations. The Efficient Frontier represents the optimal risk-return balance for a given set of assets. By removing highly correlated assets and fine-tuning existing allocations, the portfolio's expected return could increase to 17.82% with a similar risk level. This optimization focuses on maximizing returns while maintaining the current risk profile, offering a potential pathway for improved performance.

Ongoing product costs Info

  • iShares MSCI EM Asia UCITS ETF 0.20%
  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • Amundi Stoxx Europe 600 UCITS ETF C EUR 0.07%
  • iShares S&P 500 USD Information Technology Sector UCITS 0.15%
  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is impressively low at 0.12%, which supports better long-term performance by minimizing costs. Keeping expenses low is crucial, as high fees can erode returns over time. The use of low-cost ETFs aligns well with best practices in cost management. Continually reviewing and optimizing costs, perhaps by replacing higher-fee funds, can further enhance net returns and align with a cost-conscious investment approach.

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