Balanced and Broadly Diversified Portfolio with Strong Historical Performance and High Geographic Concentration in North America
Report created on Nov 25, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAG - IE00BFMXXD54 40.00% -
VW Vanguard FTSE All-World UCITS ETF USD Accumulation
VWRP - IE00BK5BQT80 40.00% -
SG iShares Physical Gold ETC
SGLN - IE00B4ND3602 10.00% -
US SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc
USSC - IE00BSPLC413 10.00%
The portfolio consists of four ETFs, with a strong focus on equities and a small allocation in gold. The Vanguard S&P 500 and Vanguard FTSE All-World ETFs each make up 40% of the portfolio, providing substantial exposure to large-cap stocks. The iShares Physical Gold ETF and SPDR MSCI USA Small Cap Value Weighted ETF each contribute 10%, offering a hedge against inflation and exposure to small-cap value stocks. This composition indicates a balanced approach, with a focus on growth and some defensive elements.
Growth
Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 14.21%. This suggests a robust growth trajectory, although the maximum drawdown of -23.98% highlights potential volatility. The fact that 90% of returns are concentrated in just 21 days suggests a high level of market sensitivity. Such volatility is typical for a portfolio with significant equity exposure, emphasizing the need for a long-term investment horizon to ride out market fluctuations.
Projection
Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows strong potential for future growth. The median outcome suggests an impressive 499.28% increase, with 990 simulations yielding positive returns. This simulation provides a probabilistic forecast, illustrating a range of potential outcomes based on historical data. While the 5th percentile shows a modest 57.41% increase, the 67th percentile indicates a potential 757.18% growth, underscoring the importance of understanding risk and potential reward.
Asset classes
- Stocks 90%
- Other 10%
The portfolio is heavily weighted towards equities, with nearly 90% in stocks and a small allocation in gold. This allocation supports growth but also introduces higher risk, as equities tend to be more volatile than other asset classes. The gold allocation acts as a hedge against market downturns and inflation, offering some diversification benefits. Maintaining this balance could be beneficial, but it may be worth considering additional asset classes to further diversify and potentially reduce risk.
Sectors
- Technology 24%
- Financials 14%
- Consumer Discretionary 10%
- Health Care 9%
- Industrials 8%
- Telecommunications 7%
- Consumer Staples 5%
- Energy 3%
- Basic Materials 3%
- Real Estate 3%
- Utilities 2%
Sector allocation is diverse, with a significant focus on technology, financial services, and consumer cyclicals. This diversification across sectors helps mitigate risk, as different sectors perform well under varying economic conditions. However, the heavy weighting in technology could expose the portfolio to sector-specific risks, such as regulatory changes or market saturation. A balanced sector allocation is crucial for reducing risk, and periodic reviews can help maintain this balance as market conditions evolve.
Regions
- North America 75%
- Europe Developed 6%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily concentrated in North America, with 75.4% exposure. This provides access to a mature and stable market but also limits exposure to potential growth opportunities in other regions. While developed markets like Europe and Japan have some representation, emerging markets are underrepresented. This geographic concentration could limit diversification benefits and expose the portfolio to region-specific risks. Broadening geographic exposure could enhance diversification and capture growth in emerging economies.
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 portfolio can be optimized by adjusting the balance between risk and return along the efficient frontier. To achieve a riskier portfolio, consider increasing exposure to equities or growth-oriented sectors. For a more conservative approach, incorporating more fixed-income assets or defensive sectors could help. However, given the current structure, focusing on geographic diversification and maintaining low costs may offer more immediate benefits. Regularly reviewing the portfolio's alignment with financial goals is essential for optimization.
Ongoing product costs
- iShares Physical Gold ETC 0.25%
- SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc 0.30%
- Vanguard S&P 500 UCITS Acc 0.07%
- Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
- Weighted costs total (per year) 0.17%
The portfolio's total expense ratio (TER) is relatively low at 0.17%, indicating cost-efficiency. Low costs are crucial for maximizing net returns, as high fees can erode gains over time. The individual ETFs have varying expense ratios, with the Vanguard S&P 500 ETF being the most cost-effective at 0.07%. Keeping investment costs low is a smart strategy, and periodically reviewing and comparing fees can help ensure the portfolio remains cost-effective, enhancing overall performance.
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