A globally diversified equity portfolio with heavy United States tilt and very low ongoing product costs
Report created on Nov 22, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
LC Lyxor Core MSCI World (DR) UCITS ETF
LCUW - LU1781541179 37.50% -
VG Vanguard FTSE All-World UCITS ETF
VGWL - IE00B3RBWM25 37.50% -
SX iShares Core S&P 500 UCITS ETF USD (Acc)
SXR8 - IE00B5BMR087 25.00%
The structure is a pure equity portfolio split across three broad index ETFs with very similar exposures. Two global funds and one focused on a major developed market together create a strong tilt toward large international companies, with a big overlap between holdings. This kind of setup is simple and easy to maintain, which is great for long‑term investing. However, owning multiple funds that track similar universes does not add much extra diversification. Streamlining to fewer overlapping positions can keep the overall exposure similar while making it easier to track performance, rebalance, and understand where risk and returns are really coming from.
Growth
Using a simple example, an initial 10,000 investment growing at a 14.75% CAGR (Compound Annual Growth Rate) would have multiplied several times over the past period. CAGR is like the average speed of a car over a long trip: it smooths out all the ups and downs into one yearly growth figure. Compared to typical balanced benchmarks, that growth is more in line with equity‑only portfolios, reflecting the 100% stock allocation. The max drawdown of about -34% shows that big temporary drops are very possible. That level of decline is normal for full equity exposure, but it does require a strong stomach during market stress.
Projection
The Monte Carlo simulation, which ran 1,000 different “what if” return paths, suggests a wide range of possible future outcomes. Monte Carlo works by taking past return patterns and mixing them randomly to see how a portfolio might behave over time under many scenarios. The median result of around 650% means the middle simulation ended up at about 6.5 times the starting value, while even the 5th percentile shows a gain, at roughly 175%. This looks very optimistic and reflects a strong equity tilt and high historical returns. It is crucial to remember that simulations are only models; real markets may be much rougher or calmer than the scenarios used.
Asset classes
- Stocks 100%
All investable assets are in stocks, with no bonds, cash, or alternatives showing up in the main allocation. This is a clear, growth‑focused structure and explains the strong historical performance and the higher drawdowns. Many balanced benchmarks mix equities with more defensive assets to smooth the ride, so this portfolio will usually swing more than a typical “balanced” mix even if the risk score sits in the middle of the scale. For someone wanting equity‑style long‑term growth while softening volatility, adding a small buffer of lower‑risk assets could reduce the depth of future drawdowns without needing to change the core equity approach.
Sectors
- Technology 30%
- Financials 15%
- Consumer Discretionary 11%
- Industrials 9%
- Health Care 9%
- Telecommunications 9%
- Consumer Staples 5%
- Energy 3%
- Basic Materials 3%
- Utilities 2%
- Real Estate 2%
Sector exposure is broadly diversified and lines up quite well with global equity benchmarks, which is a real strength. Technology sits around 30%, followed by financials, consumer cyclicals, industrials and healthcare in healthy double‑digit or high single‑digit ranges. This is very similar to many world indices, meaning the portfolio naturally reflects how global stock markets are currently structured. A tech tilt can be great for growth but may feel bumpy when interest rates rise or when investors rotate toward more defensive areas. Since the allocation already mirrors common benchmarks, a sensible approach is simply to accept these natural shifts rather than trying to time sector cycles.
Regions
- North America 78%
- Europe Developed 11%
- Japan 4%
- Asia Emerging 2%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographic exposure is heavily tilted to North America at about 78%, with Europe developed in the low double digits and the rest spread across Japan, developed Asia, emerging Asia and smaller regions. This pattern closely resembles many global indices, which are dominated by large US companies, and it has been a tailwind in the last decade. However, it also means results are strongly linked to that one region’s economic and policy environment. Keeping some allocation to other developed and emerging markets is helpful for diversification over very long horizons, even if they lag at times. This current spread is still broadly aligned with global standards, which is reassuring from a diversification standpoint.
Market capitalization
- Mega-cap 47%
- Large-cap 35%
- Mid-cap 17%
- Small-cap 1%
Market capitalization is concentrated in mega and big companies, with nearly all exposure in the largest global firms and only a modest slice in mid caps and a tiny amount in small caps. This is how most market‑cap‑weighted indices are built, so it aligns nicely with how global benchmarks work. Large companies tend to be more stable and liquid, which can reduce company‑specific risk, but they may not always deliver the fastest growth compared to smaller firms. The current tilt favors stability and broad market exposure over aggressive small‑cap bets. Anyone wanting more return potential at the cost of extra volatility could consider modestly increasing exposure further down the size spectrum.
Redundant positions
-
High correlationLyxor Core MSCI World (DR) UCITS ETFVanguard FTSE All-World UCITS ETFiShares Core S&P 500 UCITS ETF USD (Acc)
All three ETFs in the portfolio are highly correlated, meaning their prices tend to move up and down together. Correlation is a simple measure of how often assets move in the same direction; high correlation reduces the diversification benefit because everything reacts similarly in market shocks. Here, the overlapping global and large‑cap developed exposures mean changing weights among these funds does little to change total risk. Consolidating into one or two core funds with similar coverage could simplify the structure without really changing the overall risk profile. True diversification improvements would come more from adding different asset types than from shuffling these highly similar funds.
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.
From a risk‑return perspective, the portfolio already sits in a strong position because it uses broad, low‑cost equity funds. The Efficient Frontier is a curve showing the best possible risk‑return combinations you can build from a given set of assets. Within the current lineup, shifting weights among very similar, highly correlated equity funds won’t drastically change that efficiency. What could move the portfolio closer to the frontier is either trimming redundant overlap or introducing assets that behave differently in downturns, such as more defensive holdings. It is important to remember that “efficient” only means the best trade‑off between risk and return for these building blocks, not necessarily the calmest ride or the most income.
Dividends
- Vanguard FTSE All-World UCITS ETF 0.80%
- Weighted yield (per year) 0.30%
The overall dividend yield around 0.30% is relatively low, reflecting a focus on total return rather than high income. One of the main funds distributes a modest yield, while another accumulates income inside the fund instead of paying it out, which can be tax‑efficient depending on personal circumstances. For a growth‑oriented strategy with a long horizon, a lower yield is not a problem; returns mainly come from price appreciation. Income‑focused investors usually look for higher, more predictable payments, sometimes at the cost of slower capital growth. Here the setup suits someone who is happy to let dividends be reinvested and is not relying on the portfolio for regular living expenses.
Ongoing product costs
- Lyxor Core MSCI World (DR) UCITS ETF 0.12%
- iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
- Vanguard FTSE All-World UCITS ETF 0.19%
- Weighted costs total (per year) 0.15%
Ongoing product costs are impressively low, with a weighted average TER around 0.15% per year. TER (Total Expense Ratio) is like a small annual service fee built into each fund’s price; keeping it low leaves more of the investment growth in your pocket. Compared with many active funds or higher‑fee products, this cost level is very competitive and supports strong long‑term performance. Over decades, even a difference of 0.3–0.5 percentage points a year can translate into a large gap in final wealth. Maintaining this low‑cost mindset and avoiding unnecessary, expensive layers is one of the most reliable ways to improve net returns without taking on extra risk.
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