High Growth Potential with Moderate Diversification and Significant Tech Sector Exposure

Report created on Aug 1, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of two main ETFs: iShares S&P 500 Information Technology Sector UCITS ETF and iShares MSCI World ETF. With 60% allocated to the tech-focused ETF and 40% to the global ETF, the portfolio leans heavily towards technology. This composition reflects a growth-oriented strategy, with a moderate level of diversification. While the tech sector can offer substantial returns, it also introduces higher volatility. To balance the portfolio, consider adding assets from other sectors or asset classes to reduce concentration risk and enhance diversification.

Growth Info

Historically, the portfolio has shown impressive performance, with a compound annual growth rate of 36.53%. However, it has experienced a significant maximum drawdown of -30.98%, indicating periods of substantial loss. The fact that 90% of returns are concentrated in just 36 days suggests a high level of volatility. This pattern is typical for growth-focused portfolios, which can yield high returns but also come with increased risk. To mitigate potential losses, consider implementing risk management strategies, such as setting stop-loss orders or diversifying further to smooth out returns over time.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential future outcomes. The 5th percentile projects an 869.83% return, while the median (50th percentile) suggests a 5,209.1% return. The 67th percentile forecasts an 8,467.48% return. These projections underscore the high growth potential of the portfolio but also highlight the inherent uncertainty and risk. Monte Carlo simulations are useful for understanding potential future outcomes by simulating various market conditions. To prepare for different scenarios, consider maintaining a diversified asset allocation and regularly reviewing investment goals.

Asset classes Info

  • Stocks
    40%

The portfolio is predominantly composed of stocks, accounting for 39.82%, with a minor cash component. This allocation aligns with a growth-oriented strategy, prioritizing capital appreciation over income generation or capital preservation. While stocks can offer substantial returns, they also carry higher risk. To align with a more balanced investment approach, consider incorporating other asset classes like bonds or commodities, which can provide stability and reduce overall portfolio volatility. This adjustment can help achieve a well-rounded investment strategy that aligns with long-term financial goals.

Sectors Info

  • Technology
    10%
  • Financials
    6%
  • Health Care
    5%
  • Industrials
    4%
  • Consumer Discretionary
    4%
  • Telecommunications
    3%
  • Consumer Staples
    3%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation is heavily skewed towards technology, making up 9.69% of the portfolio. Other sectors, such as financial services and healthcare, have smaller allocations. This concentration in technology reflects a high-growth strategy but also exposes the portfolio to sector-specific risks. Diversifying across more sectors can help mitigate these risks and provide a buffer against downturns in any single sector. Consider reallocating a portion of the portfolio to underrepresented sectors to achieve a more balanced sector exposure, potentially enhancing stability and reducing volatility.

Regions Info

  • North America
    29%
  • Europe Developed
    7%
  • Japan
    2%
  • Australasia
    1%

Geographically, the portfolio is primarily focused on North America, with 29.37% allocation, followed by Europe and Japan. This geographic distribution suggests a tilt towards developed markets, which can offer stability and growth potential. However, the limited exposure to emerging markets may restrict opportunities for higher returns associated with these regions. To capitalize on global growth trends, consider increasing exposure to emerging markets, which can enhance diversification and provide access to different economic cycles. This strategy can help balance the portfolio and capture growth opportunities worldwide.

Dividends Info

  • iShares MSCI World ETF 1.40%
  • Weighted yield (per year) 0.56%

The portfolio's dividend yield is relatively low, with a total yield of 0.56%, primarily driven by the iShares MSCI World ETF's yield of 1.4%. This low yield is indicative of a growth-focused strategy, prioritizing capital appreciation over income generation. While dividends can provide a steady income stream, they are not the primary focus of this portfolio. If income generation is a priority, consider increasing exposure to dividend-paying stocks or funds. This adjustment can provide a balanced approach, offering both growth potential and income stability to meet financial objectives.

Ongoing product costs Info

  • iShares MSCI World ETF 0.24%
  • Weighted costs total (per year) 0.10%

The portfolio's costs are relatively low, with a total expense ratio (TER) of 0.1%. The iShares MSCI World ETF has an expense ratio of 0.24%, which is competitive for a global ETF. Keeping costs low is crucial for maximizing returns, as high fees can erode investment gains over time. This low-cost structure aligns with a cost-effective investment strategy, allowing more capital to remain invested and compound over time. To maintain this advantage, regularly review and compare expense ratios of potential investments, ensuring that the portfolio remains cost-efficient and aligned with financial goals.

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