A globally diversified equity-focused portfolio with strong historical returns and moderate risk exposure

Report created on Dec 28, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits an investor with a balanced risk tolerance and a focus on long-term growth. By prioritizing equities, it seeks capital appreciation while maintaining broad diversification across global markets. This makes it ideal for individuals who are comfortable with market fluctuations and aim to build wealth over time. The moderate risk score aligns with those who can withstand some volatility for the potential of higher returns, making it suitable for investors with a medium to long-term investment horizon.

Positions

The portfolio is heavily weighted towards equities, with over 87% allocated to Vanguard FTSE All-World ETFs, which provide broad global exposure. This composition aligns with a typical balanced portfolio aiming for growth and diversification. However, the concentration in a single asset class, equities, suggests limited exposure to bonds or alternative investments that could provide stability during market downturns. To enhance diversification, consider integrating other asset classes like bonds or commodities, which can help balance risk and return.

Growth Info

The portfolio has demonstrated a strong historical performance with a Compound Annual Growth Rate (CAGR) of 12.15%. This indicates a robust growth trajectory, outperforming many traditional benchmarks. However, it's important to note the maximum drawdown of -33.07%, which highlights potential volatility during market corrections. While past performance is not indicative of future results, this historical trend suggests the portfolio has the capacity for significant returns, albeit with some risk. Regularly reviewing performance against personal goals and risk tolerance is advisable.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests an optimistic forward trajectory. With 953 out of 1,000 simulations resulting in positive returns and an average annualized return of 10.18%, the portfolio's future looks promising. However, the 5th percentile projection at 4.15% indicates potential downside risk. It's crucial to remember that simulations are based on historical data, which cannot predict future market conditions. Continuously monitoring and adjusting the portfolio in response to economic changes is recommended.

Asset classes Info

  • Stocks
    100%

The portfolio is concentrated entirely in stocks, with negligible allocations to cash and bonds. This focus on equities can drive growth but may increase volatility, especially during market downturns. Compared to balanced benchmarks, which typically include a mix of stocks and bonds, this portfolio is more aggressive. To mitigate risk and enhance stability, consider incorporating a more diverse range of asset classes, such as fixed income or real estate, which can provide a buffer against market volatility.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio's sector allocation is tech-heavy, with 25.45% in technology, followed by financial services and healthcare. This concentration aligns with global trends but may lead to heightened volatility, particularly if interest rates rise or tech valuations fluctuate. While the sector diversification is generally balanced, it's essential to monitor these concentrations as market dynamics shift. Consider diversifying further by increasing exposure to underrepresented sectors, which can reduce sector-specific risks and enhance overall stability.

Regions Info

  • North America
    61%
  • Europe Developed
    17%
  • Asia Emerging
    8%
  • Japan
    5%
  • Asia Developed
    5%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly exposed to North America, representing 61.36% of the allocation. This heavy weighting aligns with global benchmarks but may limit exposure to growth opportunities in emerging markets. The allocation to Asia Emerging and Europe Developed offers some diversification benefits. However, increasing investments in underrepresented regions like Latin America or Africa could enhance diversification and capture potential growth. Regularly reviewing geographic allocations ensures alignment with global economic trends and personal investment goals.

Redundant positions Info

  • Xtrackers - MSCI Emerging Markets Swap UCITS ETF
    iShares MSCI EM Asia UCITS ETF
    High correlation
  • Vanguard FTSE All-World UCITS ETF USD Accumulation
    Vanguard FTSE All-World UCITS ETF
    High correlation

The portfolio contains highly correlated assets, particularly within the emerging markets ETFs. While correlation can indicate similar performance during market movements, it may reduce diversification benefits. In downturns, correlated assets might move together, amplifying losses. To enhance diversification, consider replacing some correlated assets with those that have a lower correlation, which can help mitigate risk and improve overall portfolio resilience. This approach can ensure that the portfolio remains balanced even during volatile market periods.

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's risk-return profile suggests potential for optimization using the Efficient Frontier, which identifies the best possible risk-return ratio. However, before optimizing, addressing the issue of overlapping, highly correlated assets is crucial. By reducing these overlaps, the portfolio can achieve greater diversification benefits, potentially enhancing returns without increasing risk. This approach ensures that the portfolio is not only efficient but also well-diversified, aligning with the investor's risk tolerance and long-term goals.

Dividends Info

  • iShares MSCI Europe UCITS Dist 2.90%
  • Vanguard FTSE All-World UCITS ETF 0.90%
  • Weighted yield (per year) 0.29%

The portfolio's dividend yield is relatively low at 0.29%, with the iShares MSCI Europe UCITS Dist contributing the highest yield at 2.9%. While dividends can provide a steady income stream, the focus here is clearly on capital appreciation. For investors seeking income, incorporating higher-yielding assets could be beneficial. However, if the primary goal is growth, the current structure aligns well with that objective. Regularly reassessing income needs versus growth objectives can help maintain a balanced approach.

Ongoing product costs Info

  • iShares MSCI EM Asia UCITS ETF 0.20%
  • Xtrackers - MSCI Emerging Markets Swap UCITS ETF 0.49%
  • iShares MSCI Europe UCITS Dist 0.12%
  • Vanguard FTSE All-World UCITS ETF 0.22%
  • Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
  • Weighted costs total (per year) 0.23%

The portfolio's total expense ratio (TER) is impressively low at 0.23%, indicating cost efficiency. This low cost structure supports better long-term performance by minimizing the drag on returns. Compared to industry averages, these costs are competitive and align well with best practices for cost management. Maintaining this low-cost approach is advantageous, but it's always wise to periodically review fees and explore opportunities to further reduce expenses, ensuring that costs remain aligned with investment goals.

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