A balanced portfolio with significant U.S. exposure and high correlation among ETFs

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits an investor with a balanced risk tolerance, aiming for growth with moderate risk exposure. The focus on equities and a small allocation to gold suggests a preference for capital appreciation over income. With a long-term investment horizon, this portfolio is ideal for those looking to build wealth over time while maintaining some exposure to precious metals as a hedge. The investor likely values low costs and is comfortable with some volatility in pursuit of higher returns.

Positions

  • Xetra-Gold
    4GLD - DE000A0S9GB0
    25.00%
  • iShares MSCI ACWI UCITS ETF
    IUSQ - IE00B6R52259
    25.00%
  • Vanguard S&P 500 UCITS Acc
    VUAA - IE00BFMXXD54
    25.00%
  • Vanguard S&P 500 UCITS ETF
    VUSA - IE00B3XXRP09
    25.00%

This portfolio is composed of four ETFs, each holding a 25% share. Three of these ETFs are equity-focused, with one being a gold ETF, Xetra-Gold. This composition reflects a balanced approach, providing exposure to both equity markets and precious metals. The equal weighting suggests a strategy that seeks to balance risk and return across different asset classes. Compared to typical benchmarks, this allocation is relatively concentrated in equities, which may increase volatility. To enhance diversification, consider integrating additional asset classes like bonds or real estate, which could provide more stable returns during market fluctuations.

Growth Info

The portfolio has demonstrated a strong historical performance, with a Compound Annual Growth Rate (CAGR) of 11.75%. This growth rate indicates a robust return over time, surpassing many traditional benchmarks. However, it's essential to remember that past performance doesn't guarantee future results. The portfolio's maximum drawdown of -26% highlights potential volatility during market downturns. To mitigate this risk, consider strategies like dollar-cost averaging or increasing diversification. Comparing the portfolio's performance to a benchmark, such as the MSCI World Index, can provide additional context on its relative success.

Projection Info

The portfolio's forward projection, based on Monte Carlo simulations, shows an annualized return of 12.66%. These simulations use historical data to estimate potential future outcomes, providing a range of possible returns. With a 5th percentile outcome of 59.2% and a 67th percentile of 513.7%, the simulations highlight the portfolio's potential for both downside risk and upside growth. While these projections offer valuable insights, they are not predictions and carry inherent uncertainties. To better align with personal goals, consider adjusting asset allocations or risk levels based on these projections.

Asset classes Info

  • Stocks
    75%
  • Other
    0%
  • Cash
    0%

The portfolio is heavily weighted towards stocks, comprising 75% of the total allocation. This focus on equities aligns with a growth-oriented strategy but may expose the portfolio to higher volatility. Compared to a benchmark like a balanced index fund, this allocation lacks diversification across asset classes. Introducing bonds or alternative investments could provide more stability and reduce overall risk. A more diversified asset class mix can help cushion against market downturns and provide more consistent returns over time.

Sectors Info

  • Technology
    22%
  • Financials
    11%
  • Health Care
    8%
  • Consumer Discretionary
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio's sector allocation is led by technology at 22%, followed by financial services and healthcare. This sectoral distribution is common in growth-focused portfolios but may increase susceptibility to sector-specific risks. For instance, a tech-heavy allocation can lead to higher volatility during periods of regulatory changes or interest rate fluctuations. To mitigate such risks, consider rebalancing towards sectors with lower representation, such as consumer defensives or utilities, which can offer stability during market turbulence.

Regions Info

  • North America
    67%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%
  • Australasia
    0%
  • Africa/Middle East
    0%
  • Latin America
    0%
  • Europe Emerging
    0%

The portfolio's geographic exposure is predominantly in North America, constituting 67% of the allocation. This heavy reliance on the U.S. market can lead to concentrated risk, especially during regional economic downturns. In contrast, developed Europe and emerging Asia have minimal representation. To enhance diversification and reduce U.S.-centric risk, consider increasing exposure to international markets. This approach can provide access to diverse economic cycles and growth opportunities, potentially improving the portfolio's risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    36%
  • Large-cap
    26%
  • Mid-cap
    13%
  • Small-cap
    0%

The portfolio's market capitalization distribution is skewed towards mega and big cap stocks, making up 62% of the allocation. This focus on large-cap stocks offers stability and lower volatility compared to small-cap stocks, which are absent from the portfolio. However, this lack of small-cap exposure may limit potential growth opportunities, as smaller companies often have higher growth rates. To capture these opportunities, consider incorporating small and mid-cap stocks, which can enhance diversification and provide access to emerging market leaders.

Redundant positions Info

  • Vanguard S&P 500 UCITS Acc
    Vanguard S&P 500 UCITS ETF
    iShares MSCI ACWI UCITS ETF
    High correlation

The portfolio's assets are highly correlated, particularly among the Vanguard S&P 500 UCITS Acc, Vanguard S&P 500 UCITS ETF, and iShares MSCI ACWI UCITS ETF. This high correlation indicates that the assets tend to move together, reducing the benefits of diversification. In market downturns, this can lead to increased volatility and risk. To improve diversification, consider replacing or adding assets with lower correlation, such as bonds or international stocks, which can provide a buffer against market swings and enhance overall portfolio stability.

Dividends Info

  • Vanguard S&P 500 UCITS ETF 0.30%
  • Weighted yield (per year) 0.08%

The portfolio's dividend yield is relatively low, with a total yield of 0.08%. This suggests a focus on capital appreciation rather than income generation. For investors seeking regular income, this may not align with their goals. Dividends can provide a stable income stream, especially during periods of market volatility. To increase dividend income, consider incorporating high-dividend stocks or dividend-focused ETFs. This approach can enhance cash flow and provide a cushion against market downturns, making the portfolio more resilient in volatile times.

Ongoing product costs Info

  • iShares MSCI ACWI UCITS ETF 0.20%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard S&P 500 UCITS ETF 0.07%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, which is beneficial for long-term performance. Lower costs mean more of your investment returns are retained, compounding over time. Compared to industry averages, this TER is competitive and contributes to better net returns. However, always be vigilant about hidden fees or trading costs that could impact overall performance. Regularly reviewing and optimizing costs can further enhance portfolio efficiency, ensuring that your investments work harder for you in the long run.

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.

The portfolio can be optimized using the Efficient Frontier, which seeks the best risk-return balance. Currently, the portfolio's expected return is below the optimal level of 13.46%. By adjusting allocations, particularly among highly correlated assets, you can achieve a more efficient portfolio. This doesn't necessarily mean adding new assets, but rather reallocating existing ones to improve the risk-return ratio. Remember, efficiency is about maximizing returns for a given level of risk, not necessarily increasing diversification or changing overall strategy.

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