Balanced Globally Diversified Portfolio with High Correlation and Strong Historical Performance

Report created on Nov 11, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three ETFs, with a significant allocation to the Vanguard FTSE All-World UCITS ETF USD Accumulation, making up 60%. The Vanguard S&P 500 UCITS Acc holds 25%, and the iShares Core MSCI Emerging Markets IMI UCITS consists of 15%. This composition provides broad global exposure, primarily focusing on equities. The portfolio is diversified across various regions and sectors, with a risk score of 4 out of 7, indicating a balanced risk profile. This structure is suitable for investors looking to maintain a diversified approach while accepting moderate risk levels.

Growth Info

Historically, the portfolio has demonstrated strong performance, achieving a compound annual growth rate (CAGR) of 12.45%. Despite its robust returns, it has faced a maximum drawdown of -33.21%, indicating potential volatility during market downturns. The portfolio's performance is concentrated, with 90% of returns attributed to just 17 days. This highlights the importance of staying invested over the long term to capture these critical performance days. Investors should be prepared for short-term fluctuations while focusing on the portfolio's overall potential for growth.

Projection Info

Using a Monte Carlo simulation, the portfolio's future performance was projected, assuming a hypothetical initial investment. The simulation ran 1,000 iterations, revealing that 989 simulations resulted in positive returns. The median (50th percentile) projection suggests a potential growth of 306.41%, while the 5th percentile indicates a more conservative estimate of 31.24%. This analysis underscores the portfolio's potential for significant growth, albeit with inherent uncertainties. Investors should remain mindful of the range of possible outcomes and align their expectations with their risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in equities, with stocks accounting for approximately 99.89% of the total allocation. This concentration in equities suggests a focus on capital appreciation rather than income generation or capital preservation. While equities can offer higher returns, they also come with increased volatility. Investors should consider whether this equity-heavy allocation aligns with their long-term objectives and risk tolerance. Diversifying into other asset classes, such as bonds, could provide more stability and reduce overall portfolio risk, depending on individual investment preferences.

Sectors Info

  • Technology
    27%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation of the portfolio is diverse, with a notable emphasis on Technology, which makes up about 26.86%. Financial Services and Consumer Cyclicals follow, comprising 16.12% and 10.74% respectively. This sector distribution reflects a growth-oriented strategy, with a significant focus on technology-driven innovation. While this allocation can lead to high returns, it may also expose the portfolio to sector-specific risks. Investors should monitor sector performance and consider rebalancing if any sector becomes overly dominant, potentially impacting the portfolio's risk and return characteristics.

Regions Info

  • North America
    64%
  • Asia Emerging
    11%
  • Europe Developed
    9%
  • Asia Developed
    7%
  • Japan
    4%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Australasia
    1%

Geographically, the portfolio is predominantly invested in North America, which represents 63.63% of the allocation. Asia Emerging and Europe Developed follow, with 11.27% and 9.23% respectively. This geographic composition offers exposure to both developed and emerging markets, providing a balance between stability and growth potential. However, the heavy reliance on North American markets could increase vulnerability to regional economic fluctuations. Investors should assess whether this geographic distribution aligns with their investment strategy and consider diversifying further to mitigate potential regional risks.

Redundant positions Info

  • Vanguard S&P 500 UCITS Acc
    Vanguard FTSE All-World UCITS ETF USD Accumulation
    High correlation

The portfolio exhibits high correlation between the Vanguard S&P 500 UCITS Acc and the Vanguard FTSE All-World UCITS ETF USD Accumulation. This correlation suggests that these assets tend to move in similar directions, which may limit diversification benefits. High correlations can result in increased portfolio volatility during market downturns. Investors should be aware of these correlations and consider strategies to introduce less correlated assets, potentially enhancing diversification and reducing overall portfolio risk. However, given the current structure, monitoring correlation dynamics is crucial for informed decision-making.

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.

Portfolio optimization is not recommended at this time due to the high correlation between existing assets. Instead, focus on understanding the current allocation and its alignment with personal risk tolerance and financial goals. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. By adjusting the asset mix, investors can target different risk-return profiles. However, given the current structure, efforts should be directed towards monitoring performance and ensuring that the portfolio continues to meet long-term objectives while maintaining its balanced risk profile.

Ongoing product costs Info

  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.18%

The portfolio's total expense ratio (TER) is 0.18%, reflecting a relatively low cost structure. This low-cost approach is advantageous, as it minimizes fees and maximizes net returns over time. The individual TERs of the ETFs range from 0.07% to 0.22%, indicating a cost-efficient selection of funds. Investors should continue to prioritize low-cost investment options to enhance portfolio performance. Regularly reviewing the cost structure ensures that fees remain competitive and aligned with the investor's objectives, contributing to the overall effectiveness of the investment strategy.

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