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Balanced Portfolio with Strong North American Focus and High Correlation Among Key Assets

Report created on Dec 4, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification
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Positions

The portfolio is composed of a mix of ETFs and a single common stock, with a significant focus on developed markets. Vanguard FTSE Developed World UCITS ETF and Vanguard S&P 500 UCITS ETF each hold 40% of the portfolio, making up the bulk of the investment. Berkshire Hathaway Inc. adds a touch of individual stock exposure at 10%, while smaller allocations to Vanguard FTSE Emerging Markets UCITS and Xtrackers NASDAQ 100 UCITS ETF diversify the portfolio further. This composition suggests a balanced approach, aiming for steady growth with a moderate risk profile.

Growth Info

Historically, the portfolio has demonstrated impressive growth with a compound annual growth rate (CAGR) of 15.15%. However, it has also experienced a maximum drawdown of -15.24%, indicating periods of volatility. This performance reflects the portfolio's exposure to high-performing sectors like technology and financial services, but also its susceptibility to market downturns. The significant returns achieved over a few days highlight the importance of remaining invested during volatile periods. Overall, the portfolio's past performance suggests a strong growth potential, albeit with some risk.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected based on a hypothetical initial investment. The analysis shows a wide range of potential outcomes, with the 5th percentile at 147.48% and the 67th percentile at 773.41%. The median outcome suggests a 563.96% return, indicating a strong likelihood of positive returns. This simulation helps illustrate the uncertainty and variability of future returns, emphasizing the importance of a long-term investment strategy to weather potential fluctuations.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.98% of assets in this class. This high allocation to equities suggests a growth-oriented strategy, capitalizing on the potential for higher returns compared to other asset classes like bonds or cash. While this focus can drive substantial growth, it also introduces greater volatility and risk. To mitigate this, consider diversifying into other asset classes, which could provide stability during market downturns and reduce overall portfolio risk.

Sectors Info

  • Technology
    27%
  • Financials
    13%
  • No data
    10%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Telecommunications
    8%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is diversified, with technology leading at 27.17%, followed by financial services and consumer cyclicals. This sector mix indicates a focus on growth industries with significant potential for future development. However, the concentration in technology also introduces sector-specific risks, such as regulatory changes or market saturation. Balancing sector exposure can help manage these risks and ensure that the portfolio remains resilient across various economic conditions. Consider periodically reviewing sector allocations to maintain a balanced approach.

Regions Info

  • North America
    84%
  • Europe Developed
    7%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily skewed towards North America, accounting for 83.78% of the allocation. This concentration reflects a strong belief in the region's economic prospects but also exposes the portfolio to regional risks. Diversifying geographically can help mitigate these risks and capture growth opportunities in other parts of the world. Although there are smaller allocations to Europe, Asia, and other regions, increasing exposure to emerging markets or other developed regions could enhance diversification and reduce reliance on North American markets.

Redundant positions Info

  • Vanguard S&P 500 UCITS ETF
    Vanguard FTSE Developed World UCITS ETF USD Distributing
    High correlation

The portfolio exhibits high correlation among its key assets, particularly between the Vanguard S&P 500 UCITS ETF and Vanguard FTSE Developed World UCITS ETF. This correlation suggests limited diversification benefits, as these assets tend to move in the same direction. Reducing overlap between highly correlated assets can enhance diversification, potentially smoothing out returns and reducing volatility. Consider introducing assets with lower correlation to existing holdings to achieve a more balanced risk-return profile.

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.

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Before optimizing, address the high correlation between key assets, which limits diversification benefits. Consider reducing overlap to improve diversification and manage risk. By adjusting asset allocation along the efficient frontier, you can achieve a riskier or more conservative portfolio. Moving towards a more conservative allocation involves increasing exposure to lower-risk assets, while a riskier allocation would focus more on equities. Prioritize diversification improvements before optimization to enhance overall portfolio performance.

Dividends Info

  • Vanguard FTSE Developed World UCITS ETF USD Distributing 1.50%
  • Vanguard S&P 500 UCITS ETF 0.90%
  • Weighted yield (per year) 0.96%

The portfolio's dividend yield stands at 0.96%, with contributions from the Vanguard FTSE Developed World UCITS ETF and Vanguard S&P 500 UCITS ETF. While not a primary focus of the portfolio, dividends provide a steady income stream, which can be reinvested to compound growth over time. For those seeking higher income, exploring dividend-focused investments could be an option. However, it's essential to balance income generation with growth potential to maintain the portfolio's overall objectives.

Ongoing product costs Info

  • Vanguard FTSE Developed World UCITS ETF USD Distributing 0.12%
  • Vanguard FTSE Emerging Markets UCITS 0.22%
  • Vanguard S&P 500 UCITS ETF 0.07%
  • Xtrackers NASDAQ 100 UCITS ETF 1C GBP 0.20%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is relatively low at 0.1%, thanks to the inclusion of cost-effective ETFs like Vanguard S&P 500 UCITS ETF. Keeping investment costs low is crucial for maximizing net returns over time. While the current cost structure is efficient, regularly reviewing and optimizing fees can further enhance portfolio performance. Consider staying informed about any changes in fund fees or exploring alternative low-cost investment options to ensure ongoing cost efficiency.

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