Balanced Portfolio with Moderate Diversification and High Technology Exposure Suitable for Medium Risk Investors in Germany

Report created on Nov 25, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed primarily of ETFs, with a significant allocation to the SPDR® MSCI World UCITS ETF, making up 60% of the total. This concentration indicates a strong emphasis on global equities, complemented by a 15% allocation to Xetra-Gold and iShares Core S&P 500 UCITS ETF USD (Acc), and a 10% allocation to the Xtrackers MSCI World Information Technology UCITS ETF 1C. This setup provides a broad exposure to international markets with a notable tilt towards technology. The moderately diversified nature suggests a balanced approach, offering a mix of growth potential and risk management.

Growth Info

Historically, the portfolio has demonstrated impressive performance, with a compound annual growth rate (CAGR) of 15.52%. Despite a maximum drawdown of -28.89%, the overall returns have been strong, reflecting the resilience and growth potential of the chosen assets. The portfolio's ability to generate significant returns over time indicates a well-constructed strategy, albeit with some volatility. This historical performance suggests that the portfolio is capable of delivering substantial long-term gains, although investors should be prepared for potential fluctuations in value.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows promising forward projections. Assuming a hypothetical initial investment, the analysis reveals a 5th percentile end value of 203.98% and a 50th percentile of 851.62%. The annualized return across all simulations is 18.65%, indicating robust potential growth. Monte Carlo simulations provide a range of possible outcomes, helping investors understand potential risks and rewards. This projection underscores the portfolio's capacity for growth while highlighting the importance of considering variability in future returns.

Asset classes Info

  • Stocks
    85%

The portfolio is heavily weighted towards stocks, with 84.95% of the allocation in this asset class, reflecting a growth-oriented strategy. A small percentage is allocated to other asset classes, such as cash and gold, providing minimal diversification. This concentration in equities suggests a focus on capital appreciation, with limited exposure to fixed-income or alternative investments. To enhance diversification, consider incorporating a broader range of asset classes, which can help mitigate risk and provide more stability during market downturns.

Sectors Info

  • Technology
    31%
  • Financials
    11%
  • Health Care
    8%
  • Consumer Discretionary
    8%
  • Industrials
    7%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation reveals a significant exposure to technology, comprising 30.73% of the portfolio, followed by financial services and healthcare. This concentration in technology can drive growth but also introduces sector-specific risks. The presence of other sectors like consumer cyclicals, industrials, and communication services adds some diversification. However, the heavy technology weighting may lead to increased volatility. Balancing the sector distribution by incorporating more defensive sectors could enhance the portfolio's resilience against market fluctuations.

Regions Info

  • North America
    69%
  • Europe Developed
    10%
  • Japan
    4%
  • Australasia
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for 69.33% of the allocation, with Europe Developed and Japan following. This regional concentration indicates a strong reliance on the performance of North American markets. While this can offer growth opportunities, it also exposes the portfolio to geopolitical and economic risks specific to these regions. Expanding the geographic exposure to include more emerging markets and diverse regions could improve diversification and reduce potential risks associated with regional dependencies.

Redundant positions Info

  • iShares Core S&P 500 UCITS ETF USD (Acc)
    SPDR® MSCI World UCITS ETF
    Xtrackers MSCI World Information Technology UCITS ETF 1C
    High correlation

The portfolio exhibits high correlations among certain assets, particularly the iShares Core S&P 500 UCITS ETF USD (Acc), SPDR® MSCI World UCITS ETF, and Xtrackers MSCI World Information Technology UCITS ETF 1C. This correlation suggests that these assets tend to move in tandem, which can limit diversification benefits. Reducing the overlap of highly correlated assets could enhance diversification and potentially improve risk-adjusted returns. By selecting assets with lower correlations, the portfolio can achieve a more balanced risk profile and reduce vulnerability to market swings.

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.

Before optimizing the portfolio, it's important to address the overlap of highly correlated assets, which currently limits diversification benefits. By reducing these overlaps, the portfolio could achieve a more balanced risk-return profile. Moving along the efficient frontier, the investor can choose to either increase the expected return by accepting more risk or decrease risk while maintaining a reasonable return. This optimization process involves adjusting the asset allocation to align with the investor's risk appetite and financial goals, ultimately enhancing the portfolio's efficiency.

Ongoing product costs Info

  • SPDR® MSCI World UCITS ETF 0.12%
  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • Xtrackers MSCI World Information Technology UCITS ETF 1C 0.25%
  • Weighted costs total (per year) 0.12%

The portfolio's costs are relatively low, with a total expense ratio (TER) of 0.12% for most ETFs, except for the Xtrackers MSCI World Information Technology UCITS ETF 1C at 0.25%. Keeping investment costs low is crucial for maximizing returns over time. The competitive TERs indicate an efficient cost structure, which can significantly enhance net returns. Investors should continue to monitor and manage costs, ensuring that expenses remain minimized. Opting for low-cost investment vehicles can help preserve capital and improve overall portfolio performance.

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