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

Report created on Dec 11, 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 predominantly composed of equity ETFs, with a significant 60% allocation to the Vanguard S&P 500 UCITS Acc. The remaining 40% is split equally between the Vanguard ESG Global All Cap UCITS ETF and the Xtrackers MSCI World Information Technology UCITS ETF. This structure indicates a strong focus on large-cap U.S. equities, with a notable emphasis on technology. While the portfolio is moderately diversified, it leans heavily on equities, making it more sensitive to stock market fluctuations. To mitigate this risk, it might be beneficial to explore adding other asset classes like bonds or commodities to achieve greater diversification.

Growth Info

Historically, the portfolio has shown a commendable compound annual growth rate (CAGR) of 16.96%, with a maximum drawdown of -19.58%. This suggests robust returns, albeit with some volatility. Such historical performance is indicative of the portfolio's capacity to capitalize on market upswings, particularly within tech-heavy and U.S.-focused segments. However, it's crucial to remember that past performance is not always indicative of future outcomes. To manage potential downturns, consider strategies like periodic rebalancing or incorporating defensive assets to cushion against volatility.

Projection Info

The forward projection using Monte Carlo simulations suggests a promising outlook, with the median (50th percentile) ending value at 873.64%. This method uses historical data to simulate a range of possible future outcomes, providing a probabilistic view of potential returns. While the simulations show a high likelihood of positive returns, they are based on historical trends and assumptions that might not hold in the future. It's advisable to regularly review the portfolio's alignment with personal goals and risk tolerance to ensure it remains on track, especially in changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, accounting for nearly 100% of the asset allocation. This concentration in a single asset class can lead to increased risk, especially during market downturns. While equities offer growth potential, they also come with higher volatility. Diversifying across different asset classes, such as fixed income or real estate, can help manage risk and provide more stability. By balancing the portfolio with a mix of asset classes, investors can achieve more consistent returns over time, reducing the impact of market fluctuations.

Sectors Info

  • Technology
    46%
  • Financials
    11%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Real Estate
    2%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%

Sector-wise, the portfolio is particularly concentrated in technology, which comprises over 45% of the allocation. Other sectors like financial services, healthcare, and consumer cyclicals have smaller, yet significant, representations. This heavy tech focus can drive growth, especially if the sector continues to perform well. However, it also exposes the portfolio to sector-specific risks. To mitigate these risks and enhance diversification, consider increasing exposure to underrepresented sectors like utilities or basic materials, which can provide stability and reduce reliance on the tech sector's performance.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Japan
    2%
  • Asia Emerging
    1%
  • Asia Developed
    1%

Geographically, the portfolio is overwhelmingly exposed to North America, with over 91% allocation. This concentration can lead to heightened risk if the U.S. market faces downturns. While the U.S. market has historically been a strong performer, diversification into other regions can provide a hedge against regional economic risks. Consider gradually increasing exposure to emerging markets or other developed regions to balance the geographic allocation. This can help capture growth opportunities in diverse markets and reduce dependency on a single region's economic performance.

Redundant positions Info

  • Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating
    Vanguard S&P 500 UCITS Acc
    High correlation

The portfolio's assets exhibit high correlation, particularly between the Vanguard S&P 500 UCITS Acc and the Vanguard ESG Global All Cap UCITS ETF. High correlation means that these assets tend to move together, which can amplify risk rather than mitigate it. To enhance diversification benefits, consider replacing or reducing exposure to highly correlated assets and introducing less correlated investments. This approach can improve risk management by ensuring that not all parts of the portfolio react similarly to market movements, thus smoothing overall 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.

Optimizing the portfolio using the Efficient Frontier could improve the risk-return profile by adjusting the current asset weights. The Efficient Frontier represents the set of optimal portfolios offering the highest expected return for a defined level of risk. Given the current asset mix, focusing on reducing overlap between highly correlated assets could lead to a more efficient allocation. However, this optimization is based solely on the existing asset pool, meaning it doesn't guarantee diversification across broader investment opportunities. Regularly reassessing asset weights can ensure alignment with evolving market conditions and personal goals.

Ongoing product costs Info

  • Vanguard ESG Global All Cap UCITS ETF (USD) Accumulating 0.24%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Xtrackers MSCI World Information Technology UCITS ETF 1C 0.25%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is relatively low at 0.14%, which is advantageous for long-term growth as it minimizes the drag on returns. Lower costs mean more of your money is working for you, compounding over time. However, always stay vigilant about any changes in fees or additional charges that might arise. Regularly reviewing the TER and comparing it with other investment options can ensure you're getting the best value. If fees increase, consider exploring alternative funds with similar strategies but lower costs to maintain cost efficiency.

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