Balanced Broadly Diversified Portfolio with Strong Global Exposure and Moderate Risk Suitable for Medium-Term Growth

Report created on Nov 15, 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 four ETFs, with the Vanguard FTSE All-World UCITS ETF USD Accumulation making up 50% of the total allocation. This ETF offers a comprehensive exposure to global markets, providing a solid foundation for diversification. The iShares MSCI World Small Cap UCITS ETF USD (Acc) adds a 20% allocation, focusing on smaller companies worldwide, which can enhance the potential for growth. The remaining 30% is divided equally between the Vanguard FTSE Developed Europe UCITS and Vanguard FTSE Emerging Markets UCITS ETFs, offering exposure to both developed and emerging markets. This composition reflects a balanced approach, blending stability and growth potential.

Growth Info

Historically, the portfolio has demonstrated a strong performance with a compound annual growth rate (CAGR) of 10.38%. This indicates that a hypothetical initial investment would have grown significantly over time. The maximum drawdown of -26.57% suggests that while the portfolio has experienced periods of volatility, it has also shown resilience in recovering from downturns. The fact that 90% of returns are concentrated in just 15 days highlights the importance of staying invested to capture these key moments. This historical performance underscores the potential of the portfolio to deliver solid returns over the long term.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, we can project potential future performance of the portfolio. This method uses random sampling to model potential outcomes, helping to understand the range of possible returns. Assuming a hypothetical initial investment, the median outcome suggests a potential growth of 218.83%. The simulation also indicates a high likelihood of positive returns, with 956 out of 1,000 simulations showing gains. The annualized return across all simulations is 10.35%, aligning closely with historical performance. This forward-looking analysis provides confidence in the portfolio's ability to achieve growth, though it is important to remain aware of inherent uncertainties.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.7% allocated to stocks. This high equity exposure aligns with the balanced risk profile, offering potential for capital appreciation. A small portion is allocated to cash and other assets, providing minimal liquidity and diversification. The negligible bond allocation suggests a focus on growth rather than income generation. For those seeking to balance risk, incorporating bonds could provide more stability. However, given the current composition, the portfolio is well-suited for investors comfortable with higher volatility and the potential for greater returns.

Sectors Info

  • Technology
    19%
  • Financials
    17%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation within the portfolio is diverse, with significant investments in technology (19.15%), financial services (17.40%), and industrials (12.63%). This distribution reflects a strategic approach to capture growth across various industries. Technology and financial services are known for their innovation and potential for high returns, while industrials provide a more stable growth avenue. Other sectors like consumer cyclicals, healthcare, and communication services also play a role in diversification. This sector allocation supports a balanced approach, mitigating risks associated with sector-specific downturns while capitalizing on growth opportunities across multiple industries.

Regions Info

  • North America
    46%
  • Europe Developed
    25%
  • Asia Emerging
    12%
  • Japan
    5%
  • Asia Developed
    5%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Australasia
    2%

Geographically, the portfolio is well-diversified with significant exposure to North America (45.84%) and Europe Developed (25.36%). This allocation captures the stability and growth of established markets. Asia Emerging and Japan together account for over 17%, providing exposure to rapidly growing economies. Smaller allocations to Africa/Middle East, Latin America, and Australasia add further diversification. This geographic spread helps mitigate regional risks and leverages global growth opportunities. The portfolio's broad geographic composition is a strength, offering a balanced approach to capturing returns from both mature and emerging markets.

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.

The current portfolio is not on the efficient frontier, which represents the optimal risk-return trade-off. By adjusting the asset allocation, it is possible to achieve a higher expected return of 11.68% with the same risk level. The efficient frontier concept involves finding the best possible portfolio for a given risk level. Although the current portfolio is well-diversified, exploring optimization options could enhance performance. This involves assessing the balance between risk and return, ensuring the portfolio aligns with investment goals and risk tolerance. Continuous evaluation and adjustment can lead to improved outcomes.

Dividends Info

  • Vanguard FTSE Developed Europe UCITS 3.10%
  • Vanguard FTSE Emerging Markets UCITS 2.40%
  • Weighted yield (per year) 0.82%

With a total yield of 0.82%, the portfolio provides modest income through dividends. The Vanguard FTSE Developed Europe UCITS and Vanguard FTSE Emerging Markets UCITS contribute to this yield with 3.1% and 2.4% respectively. While the focus is primarily on growth, dividends offer additional returns that can be reinvested to enhance compounding. For investors seeking higher income, exploring options with greater yield potential may be beneficial. However, the current dividend strategy complements the portfolio's growth-oriented focus, providing a balanced mix of capital appreciation and income.

Ongoing product costs Info

  • Vanguard FTSE Developed Europe UCITS 0.10%
  • Vanguard FTSE Emerging Markets UCITS 0.22%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • iShares MSCI World Small Cap UCITS ETF USD (Acc) 0.35%
  • Weighted costs total (per year) 0.23%

The portfolio's total expense ratio (TER) is 0.23%, which is relatively low and advantageous for long-term investors. Low costs help maximize returns by minimizing the impact of fees on overall performance. The Vanguard FTSE Developed Europe UCITS and Vanguard FTSE Emerging Markets UCITS have particularly low expense ratios, contributing to the portfolio's cost efficiency. Keeping investment costs low is crucial, as high fees can erode returns over time. The current cost structure supports a cost-effective strategy, allowing for greater capital growth and aligning with best practices for portfolio management.

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