A balanced ETF portfolio with strong US focus and moderate diversification potential

Report created on Dec 15, 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 composed of three ETFs, with the Invesco EQQQ NASDAQ-100 and Vanguard S&P 500 each making up 40%, and iShares Core MSCI World at 20%. This setup heavily leans towards US equities, with a significant portion in technology stocks. ETFs provide a cost-effective way to gain exposure to a broad range of stocks, offering diversification benefits. However, the concentration in US markets and technology could expose the portfolio to sector-specific risks. Consider diversifying with non-US or non-tech assets to balance the exposure and mitigate potential volatility.

Growth Info

Hypothetically, if you invested €10,000 five years ago, the portfolio would have grown significantly, given the CAGR of 17.27%. This impressive growth rate indicates strong past performance, largely driven by the tech sector's boom. However, past performance does not guarantee future results, as market conditions constantly change. To maintain growth, it's crucial to regularly review and adjust the portfolio based on market trends and personal financial goals, ensuring alignment with risk tolerance and investment objectives.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected, offering a range of possible outcomes. With a median end value of 858.53%, the simulations suggest a positive outlook. However, it's important to note that these projections rely on historical data and assumptions, which may not account for unforeseen market events. Regularly revisiting portfolio projections can help in making informed decisions, but it's equally important to stay updated on market developments that could impact these outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a negligible allocation in cash and bonds. While stocks can offer higher returns, they also come with increased risk, particularly in volatile markets. A more balanced asset allocation could enhance diversification and reduce risk. Consider incorporating more bonds or alternative asset classes, which can provide stability and income, especially during market downturns. A diversified mix aligns with a balanced risk profile, offering potential for growth while managing volatility.

Sectors Info

  • Technology
    39%
  • Telecommunications
    12%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Financials
    8%
  • Industrials
    6%
  • Consumer Staples
    6%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is heavily weighted towards the technology sector, comprising nearly 39% of the total allocation. This concentration can be a double-edged sword: while it benefits from tech's rapid growth, it also heightens vulnerability to sector-specific downturns. To mitigate this risk, consider diversifying into underrepresented sectors like healthcare or consumer defensives. A more balanced sectoral allocation can provide stability and reduce dependency on any single industry's performance, aligning with a balanced investment strategy.

Regions Info

  • North America
    94%
  • Europe Developed
    4%
  • Japan
    1%

With over 94% of the portfolio allocated to North America, there's limited geographic diversification. This heavy reliance on a single region can expose the portfolio to regional economic risks. Expanding into emerging markets or other developed regions can offer diversification benefits, potentially enhancing returns while reducing risk. Geographic diversification helps cushion against localized market downturns, contributing to a more resilient portfolio that aligns with global economic trends and opportunities.

Redundant positions Info

  • Vanguard S&P 500 UCITS Acc
    iShares Core MSCI World UCITS ETF USD (Acc)
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard S&P 500 and iShares Core MSCI World ETFs. High correlation means these assets tend to move in the same direction, offering limited diversification benefits. To enhance risk management, consider reducing exposure to these overlapping assets and introducing less correlated investments. This strategy can improve the overall risk-return profile, ensuring the portfolio is better positioned to withstand market fluctuations and achieve long-term objectives.

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.

To optimize the portfolio using the Efficient Frontier, focus on adjusting the current asset allocation for the best risk-return ratio. This involves analyzing the existing assets and reallocating to achieve maximum efficiency, not necessarily increasing diversification. By optimizing, you can potentially enhance returns without taking on additional risk. It's essential to regularly reassess the portfolio's efficiency, ensuring alignment with your risk tolerance and investment goals as market conditions evolve.

Ongoing product costs Info

  • Invesco EQQQ NASDAQ-100 UCITS ETF Acc 0.35%
  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.21%

The portfolio's total expense ratio (TER) is 0.21%, which is relatively low, minimizing the impact of costs on returns. However, even small cost reductions can significantly enhance long-term returns due to compounding effects. Regularly review the TER and explore lower-cost alternatives if available. Cost efficiency is crucial for maximizing portfolio performance, ensuring more of your investment returns are retained rather than eroded by fees.

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