A balanced portfolio with strong US focus and low-cost ETFs for moderate risk investors

Report created on Jan 7, 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 two ETFs: Vanguard S&P 500 UCITS Acc, making up 73.33%, and Vanguard FTSE Developed Europe ex UK UCITS, at 26.67%. This allocation heavily favors US equities, aligning with a typical balanced portfolio that seeks growth while maintaining some diversification. The composition is simple, focusing on large-cap stocks in developed markets. While this setup provides solid exposure to stable markets, it may lack diversification across different asset classes, such as bonds or emerging markets, which could offer additional risk mitigation. Consider diversifying further to balance potential downturns in specific regions or sectors.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.13%. This impressive growth indicates strong returns over time, largely driven by the US market's historical performance. However, the max drawdown of -33.59% suggests significant volatility during market downturns. By comparing this to common benchmarks, the portfolio aligns with typical equity-heavy strategies. It's important to remember that past performance doesn't guarantee future results, so maintaining a diversified approach can help mitigate potential risks.

Projection Info

The forward projection uses Monte Carlo simulation, which runs 1,000 scenarios to predict potential future outcomes based on historical data. The median (50th percentile) projection shows a potential growth of 378.38%, indicating robust expected returns. However, the 5th percentile projection at 47.49% highlights possible downside risks. While the simulations suggest a favorable outlook, it's crucial to understand that they rely on historical trends, which may not predict future market conditions accurately. Regularly reviewing and adjusting the portfolio can help navigate changing economic landscapes.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely allocated to stocks, at 99.99%. This heavy reliance on equities provides potential for high returns but also exposes the portfolio to significant market volatility. Compared to a more balanced benchmark, which might include bonds or alternative assets, this allocation leans towards higher risk. Incorporating other asset classes could enhance diversification, reducing risk and smoothing returns over time. For those seeking to lower volatility, adding fixed-income securities or other non-correlated assets might be beneficial.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    12%
  • Industrials
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Basic Materials
    3%
  • Real Estate
    2%

The sector allocation is tech-heavy, with technology stocks comprising 26.72% of the portfolio. While this can drive growth, it also introduces higher volatility, especially during tech market corrections. Other sectors like financial services and healthcare provide some balance, but the concentration in technology could pose risks if the sector underperforms. Aligning sector weights more closely with broader benchmarks can enhance stability. Consider diversifying into less represented sectors to reduce reliance on technology and improve resilience against sector-specific downturns.

Regions Info

  • North America
    73%
  • Europe Developed
    27%

Geographically, the portfolio is heavily weighted towards North America at 73.10%, with 26.69% in developed Europe. This focus on developed markets provides stability but limits exposure to potentially high-growth regions like emerging markets. Compared to global benchmarks, this allocation is less diversified geographically. Expanding into other regions, such as Asia or emerging markets, could enhance diversification and capture growth opportunities. Balancing geographic exposure can mitigate risks associated with regional economic downturns and political instability.

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 could benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio given the current assets. While the portfolio is already well-aligned for growth, slight adjustments in asset allocation might improve its efficiency. By reallocating within the existing ETFs, the portfolio could achieve a better balance between risk and return. This optimization does not necessarily mean adding new assets but rather fine-tuning the current ones to enhance performance.

Ongoing product costs Info

  • Vanguard FTSE Developed Europe ex UK UCITS 0.10%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.08%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.08%. This efficient cost structure supports better long-term performance by minimizing drag on returns. Low costs are a key advantage, especially for long-term investors, as they compound savings over time. While the current setup is cost-effective, regularly reviewing fund fees ensures that the portfolio remains aligned with cost-saving objectives. Keeping costs low is a crucial strategy for maximizing net returns.

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