A growth-focused portfolio with strong US exposure and technology sector concentration

Report created on Dec 26, 2024

Risk profile Info

5/7
Growth
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Diversification profile Info

4/5
Broadly Diversified
← Less diversification More diversification →

Positions

The portfolio is composed of two ETFs: Vanguard S&P 500 UCITS Acc (60%) and Vanguard FTSE All-World UCITS ETF USD Accumulation (40%). With a heavy emphasis on equities, it aligns with a growth-oriented strategy. This structure is typical for investors seeking higher returns with an acceptable level of risk. Compared to common benchmarks, the portfolio's focus on broad market indices provides a solid foundation. However, it lacks diversification across asset classes, which could be a concern in volatile markets. To enhance stability, consider introducing assets such as bonds or real estate, which can provide a buffer against market downturns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 14.18%, with a maximum drawdown of -33.87%. This indicates that while the portfolio has performed well, it has also experienced significant volatility. Comparing this to a benchmark like the S&P 500, the performance is on par, reflecting the portfolio's alignment with major indices. It's important to note that past performance does not guarantee future results, but it does provide insight into potential risk and reward. Maintaining a long-term perspective can help weather periods of volatility.

Projection Info

The forward projection, using Monte Carlo simulations, suggests a wide range of potential outcomes. With 1,000 simulations, the median (50th percentile) return is projected at 477.67%, while the 5th percentile projects a more conservative 84.05%. Monte Carlo analysis uses historical data to simulate future performance, helping to understand risk and potential returns. However, it's crucial to remember that these are estimates and not predictions. The high variability underscores the importance of regularly reviewing and adjusting the portfolio to align with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly invested in stocks, accounting for 99.98% of the allocation, with minimal exposure to other asset classes. This concentration in equities aligns with a growth strategy but also increases exposure to market volatility. In comparison to a balanced portfolio, which might include bonds or commodities, this portfolio is more aggressive. To mitigate risk, consider diversifying into other asset classes. This could help in smoothing returns over time and providing protection against market fluctuations.

Sectors Info

  • Technology
    30%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    3%
  • Real Estate
    2%

The portfolio is heavily weighted towards the technology sector, which makes up nearly 30% of the allocation. Other significant sectors include financial services and consumer cyclicals. This concentration in technology suggests a high potential for growth but also exposes the portfolio to sector-specific risks. For instance, technology stocks can be particularly sensitive to interest rate changes. Balancing sector exposure by introducing more defensive sectors like utilities or healthcare can help manage risk and provide stability during economic downturns.

Regions Info

  • North America
    87%
  • Europe Developed
    6%
  • Japan
    2%
  • Asia Emerging
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America, representing over 86% of the allocation. This focus on the US market aligns with the S&P 500's influence but limits exposure to other regions. While the US market has historically performed well, geographic diversification can reduce risk by spreading exposure across different economic environments. Consider increasing allocations to Europe, Asia, or emerging markets to capture growth opportunities and enhance diversification.

Redundant positions Info

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

The assets in the portfolio are highly correlated, particularly the Vanguard FTSE All-World UCITS ETF and the Vanguard S&P 500 UCITS Acc. High correlation means these assets tend to move together, which can limit diversification benefits. In times of market downturns, this could lead to increased volatility. To improve diversification, consider adding uncorrelated assets, such as bonds or alternative investments, which can move independently and potentially offset losses during market declines.

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.

While the portfolio is currently not optimized on the Efficient Frontier, removing highly correlated assets can improve diversification and potentially enhance returns. The Efficient Frontier represents the best risk-return ratio for a given set of assets. By adjusting allocations, you can achieve a more efficient portfolio. Consider rebalancing to include uncorrelated assets, which can help in optimizing the risk-return profile without sacrificing growth potential.

Ongoing product costs Info

  • Vanguard S&P 500 UCITS Acc 0.07%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is a low 0.13%, reflecting the cost-efficient nature of the selected Vanguard ETFs. Low costs are beneficial as they enhance net returns over time, aligning with best practices for long-term investing. Keeping expenses low is crucial for maximizing returns, as high fees can erode gains. Continue monitoring costs and explore opportunities to switch to even lower-cost options if available, ensuring that investments remain cost-effective.

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