A balanced portfolio with high US exposure and moderate diversification across sectors

Report created on Jan 9, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists of two ETFs: iShares Core S&P 500 UCITS ETF (70%) and Vanguard FTSE All-World UCITS ETF (30%). It is heavily weighted toward equities, with 99.84% in stocks. This composition is typical for a balanced portfolio, aiming to capture growth while maintaining some risk control. However, the reliance on just two ETFs, particularly one focused on the US market, may limit diversification benefits. Consider adding additional asset types, like bonds or real estate, to better balance growth potential with risk mitigation.

Growth Info

The portfolio has shown strong historic performance with a Compound Annual Growth Rate (CAGR) of 15.46%. This indicates robust growth over time, outpacing many benchmarks. However, the maximum drawdown of -33.65% highlights vulnerability during market downturns. While past performance is impressive, it's essential to remember that it doesn't guarantee future results. To manage potential risks, consider strategies to mitigate drawdowns, such as diversifying into less volatile assets or sectors.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median (50th percentile) return of 575.29% over the investment horizon. This method uses historical data to estimate future performance, but remember it's not a crystal ball. All simulations resulted in positive returns, indicating a favorable outlook. However, consider the limitations of relying solely on historical trends, and explore diversifying into less correlated assets to cushion against unexpected market shifts.

Asset classes Info

  • Stocks
    100%

With nearly 100% allocation to stocks, this portfolio is heavily equity-focused. While this can drive growth, it also increases exposure to market volatility. Typically, balanced portfolios include a mix of asset classes like bonds or real estate to buffer against stock market fluctuations. By diversifying across different asset classes, you can achieve a more stable risk-return profile. Consider incorporating fixed income or alternative investments to enhance diversification and reduce overall portfolio risk.

Sectors Info

  • Technology
    31%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    2%

The sector allocation is concentrated, with a significant 31.10% in technology. While tech has been a strong performer, such concentration can lead to higher volatility, especially if interest rates rise or regulatory changes occur. The portfolio's exposure to financial services, consumer cyclicals, and healthcare adds balance, but further diversification could help. Consider spreading investments across underrepresented sectors to mitigate risks and capture potential growth opportunities in different economic cycles.

Regions Info

  • North America
    89%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

The portfolio's geographic allocation is heavily skewed toward North America, comprising 89.27% of assets. While this reflects the dominance of US markets, it limits exposure to other regions that may offer growth potential and diversification benefits. Consider increasing allocations to Europe, Asia, or emerging markets to capture different economic trends and reduce dependency on a single region. Diversifying geographically can help balance risks and potentially enhance returns.

Redundant positions Info

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

The portfolio's assets are highly correlated, with both ETFs moving similarly due to overlapping exposures. High correlation can limit diversification benefits, as assets may react similarly during market downturns. To enhance diversification, consider adding assets with lower correlation to existing holdings. This can help buffer against market volatility and improve the portfolio's risk profile, offering more stability during turbulent market conditions.

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 could benefit from optimizing the risk-return ratio using the Efficient Frontier concept. By adjusting the allocation between existing assets, you can potentially achieve better returns for the same level of risk, or reduce risk while maintaining returns. However, it's crucial to address the high correlation between current holdings before optimizing. Diversifying with less correlated assets can enhance the portfolio's efficiency and resilience against market volatility.

Ongoing product costs Info

  • iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.15%

The total expense ratio (TER) of 0.15% is impressively low, supporting better long-term performance by minimizing costs. This aligns well with best practices for cost-efficient investing. Low fees help maximize net returns, particularly in a long-term investment strategy. Continue to monitor fees and explore opportunities to reduce costs further, such as considering lower-cost alternatives or negotiating fees with service providers, to enhance overall portfolio efficiency.

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