Cautious Portfolio with Moderate Diversification and Overlapping Assets Needs Optimization for Improved Performance

Report created on Jun 18, 2024

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.

Positions

The portfolio is composed of four ETFs, each contributing to a cautious investment profile. The allocation includes 30% in iShares Global Aggregate Bond UCITS Dist, 30% in HSBC MSCI World UCITS ETF, 20% in iShares MSCI USA ESG Enhanced UCITS ETF USD Inc, and 20% in iShares MSCI World Quality Dividend ESG UCITS ETF USD (Dist). This setup offers a blend of both bonds and equities, with a slight tilt towards stocks. The portfolio is moderately diversified, reflecting a balanced approach suitable for cautious investors. To enhance diversification, consider evaluating the current asset mix and exploring additional asset classes.

Growth Info

The historical performance of the portfolio shows a CAGR of 9.6%, which is quite impressive for a cautious profile. The maximum drawdown of -25.0% indicates some level of risk, but it remains manageable for investors with a moderate risk tolerance. The portfolio's performance is driven by a few key days, suggesting that market timing could have a significant impact. To maintain consistency, it is advisable to focus on long-term growth and avoid reacting to short-term market fluctuations.

Projection Info

Utilizing a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation assumes a hypothetical initial investment, revealing a 5th percentile return of 61.53% and a 67th percentile return of 377.18%. With an annualized return of 10.66%, the portfolio shows potential for growth. Monte Carlo simulations provide a range of possible outcomes, helping investors understand potential risks and returns. To optimize future results, consider reviewing asset allocation and ensuring alignment with long-term goals.

Asset classes Info

  • Stocks
    70%
  • Bonds
    30%

The portfolio is primarily invested in stocks (69.84%) and bonds (29.76%), with minimal exposure to cash and other asset classes. This allocation reflects a cautious investment strategy, balancing growth potential with stability. The inclusion of bonds provides a buffer against market volatility, while the stocks offer growth opportunities. To further enhance stability, consider increasing exposure to bonds or other low-risk assets. This adjustment can help reduce overall portfolio risk while maintaining growth prospects.

Sectors Info

  • Technology
    22%
  • Financials
    10%
  • Health Care
    9%
  • Consumer Discretionary
    7%
  • Industrials
    6%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation reveals a strong focus on technology (21.55%), followed by financial services (10.07%) and healthcare (8.91%). This concentration in specific sectors may expose the portfolio to sector-specific risks. Diversification across a broader range of sectors can help mitigate these risks and improve overall portfolio stability. Consider evaluating the current sector allocation and exploring opportunities to diversify into underrepresented sectors, ensuring a more balanced approach to sector exposure.

Regions Info

  • North America
    54%
  • Europe Developed
    11%
  • Japan
    3%
  • Australasia
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America (54.03%), with smaller allocations in Europe Developed (11.49%) and Japan (2.82%). This concentration in North America may expose the portfolio to regional risks. While the focus on developed markets offers stability, exploring emerging markets could provide additional growth opportunities. To enhance geographic diversification, consider reallocating assets to underrepresented regions, balancing exposure between developed and emerging markets.

Redundant positions Info

  • iShares MSCI USA ESG Enhanced UCITS ETF USD Inc
    HSBC MSCI World UCITS ETF
    iShares MSCI World Quality Dividend ESG UCITS ETF USD (Dist)
    High correlation

The portfolio exhibits high correlation among three ETFs: iShares MSCI USA ESG Enhanced UCITS ETF USD Inc, HSBC MSCI World UCITS ETF, and iShares MSCI World Quality Dividend ESG UCITS ETF USD (Dist). These overlapping assets may not provide significant diversification benefits. Reducing exposure to highly correlated assets can help improve the portfolio's risk-adjusted returns. Consider reviewing the current holdings and identifying opportunities to replace or reduce correlated assets with those offering greater diversification.

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, focus on addressing the high correlation among certain assets. Reducing overlapping holdings can enhance diversification and improve risk-adjusted returns. To shift towards a riskier or more conservative portfolio, consider moving along the efficient frontier by adjusting the allocation between stocks and bonds. Increasing bond exposure can lead to a more conservative profile, while boosting stock allocation may increase potential returns. Balancing these elements can help achieve the desired risk-return trade-off.

Dividends Info

  • iShares Global Aggregate Bond UCITS Dist 1.50%
  • HSBC MSCI World UCITS ETF 0.70%
  • iShares MSCI USA ESG Enhanced UCITS ETF USD Inc 1.00%
  • iShares MSCI World Quality Dividend ESG UCITS ETF USD (Dist) 1.30%
  • Weighted yield (per year) 1.12%

The portfolio generates a total dividend yield of 1.12%, with individual yields from each ETF ranging from 0.7% to 1.5%. This yield provides a modest income stream, which can be beneficial for investors seeking regular income. To enhance dividend income, consider exploring opportunities to invest in higher-yielding assets, ensuring they align with the overall investment strategy. Balancing income generation with growth potential can help achieve a more comprehensive investment approach.

Ongoing product costs Info

  • iShares Global Aggregate Bond UCITS Dist 0.10%
  • HSBC MSCI World UCITS ETF 0.15%
  • iShares MSCI USA ESG Enhanced UCITS ETF USD Inc 0.07%
  • iShares MSCI World Quality Dividend ESG UCITS ETF USD (Dist) 0.38%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is relatively low and helps to maximize net returns. Keeping investment costs low is crucial for enhancing long-term performance. The individual ETF costs range from 0.07% to 0.38%, reflecting a cost-effective approach to investing. To maintain cost efficiency, consider regularly reviewing the expense ratios of current holdings and exploring lower-cost alternatives if available. This practice can help preserve returns and contribute to overall portfolio success.

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