Globally diversified equity portfolio tilted to small value stocks with strong low volatility characteristics
Report created on May 7, 2024Risk profile
4/7
Diversification profile
4/5
Positions
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VW Vanguard FTSE All-World UCITS ETF USD Accumulation
VWCE - IE00BK5BQT80 58.33% -
ZP SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc EUR
ZPRV - IE00BSPLC413 25.00% -
ZP SPDR® MSCI Europe Small Cap Value Weighted UCITS ETF EUR Acc
ZPRX - IE00BSPLC298 16.67%
The portfolio is made up of three equity ETFs: a broad global fund at around three fifths and two small-cap value funds in the US and Europe making up the remaining share. This structure combines a simple “core and satellite” approach where the global ETF is the diversified core and the small-cap value funds are targeted tilts. That matters because the core provides broad market exposure while the satellites aim to boost returns or add specific characteristics. The mix here creates a clear identity: global stock market exposure with an intentional bias toward smaller and cheaper companies, which can behave quite differently from the overall market over time.
Growth
Over roughly six and a half years, €1,000 grew to about €1,981, a compound annual growth rate (CAGR) of 10.68%. CAGR is like your average yearly speed over a long trip, smoothing out bumps. The portfolio slightly beat the global market benchmark but lagged the US market, which has been unusually strong in this period. The maximum drawdown of about -38% was deeper than both reference markets, showing that the portfolio can fall more during sharp downturns. This trade-off is typical for strategies with tilts toward smaller and cheaper stocks, which often recover well long term but can be more painful in rough markets.
Asset classes
- Stocks 100%
All of the portfolio is invested in stocks, with no allocation to bonds, cash, or alternatives. A 100% equity stance increases long-term growth potential but also means larger short-term swings, including double‑digit drawdowns like the one already experienced. Many balanced benchmarks would hold a mix of stocks and bonds to smooth the ride, so this portfolio is more growth‑oriented than a typical “balanced” label might imply. For investors able to tolerate volatility and with a long horizon, a full‑equity allocation can make sense, but those needing stability or near‑term withdrawals would normally pair equities with some lower‑risk assets to manage cash flow and nerves.
Sectors
- Technology 18%
- Financials 17%
- Industrials 15%
- Consumer Discretionary 12%
- Health Care 8%
- Telecommunications 7%
- Basic Materials 6%
- Energy 6%
- Consumer Staples 5%
- Real Estate 4%
- Utilities 3%
Sector exposure is broadly spread, with technology, financials, and industrials each having meaningful but not overwhelming weights. Technology at 18% is significant but not extreme compared with many global benchmarks where tech can dominate. This balanced mix means the portfolio is not overly dependent on one industry narrative, such as growth tech or energy cycles. However, sector behaviour can still differ across market environments; for example, financials and industrials may react strongly to changes in interest rates and economic growth. The broadly diversified sector layout is a positive sign, helping reduce the impact if any single industry runs into prolonged trouble or experiences a bubble.
Regions
- North America 61%
- Europe Developed 25%
- Japan 4%
- Asia Developed 4%
- Asia Emerging 3%
- Australasia 1%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is anchored in North America at 61%, with a solid 25% in developed Europe and smaller allocations across Japan, the rest of developed Asia, and emerging regions. This is quite close to common global equity benchmarks, which also lean heavily toward North America, so the regional mix is well-aligned with global standards. That alignment is beneficial because it keeps country risk in line with the investable market rather than placing big bets on single regions. The modest but present exposure to emerging and smaller markets also adds some growth potential without dominating overall risk, supporting broad diversification across different economic cycles.
Market capitalization
- Mega-cap 28%
- Mid-cap 22%
- Small-cap 21%
- Large-cap 20%
- Micro-cap 7%
Market capitalization exposure is nicely spread, with meaningful allocations to mega, large, mid, small, and even micro‑cap stocks. Many market‑cap‑weighted portfolios are heavily skewed toward mega and large companies, but here small and micro caps together reach close to 30%. That tilt increases diversification across company sizes and taps into potential long‑term size premia, where smaller firms have historically sometimes outperformed. On the flip side, small and micro caps usually come with higher volatility and can be more sensitive to economic stress or tight financial conditions. The balanced mix means returns will not be driven solely by the biggest household names, which is a structural strength.
True holdings
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NV NVIDIA Corporation 2.46%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
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AA Apple Inc 2.28%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
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MS Microsoft Corporation 1.73%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
AM Amazon.com Inc 1.20%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
GO Alphabet Inc Class A 1.08%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
23 Taiwan Semiconductor Manufacturing Co. Ltd. 0.92%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
AV Broadcom Inc 0.88%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
GO Alphabet Inc Class C 0.87%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
ME Meta Platforms Inc. 0.84%
Part of fund(s):- Vanguard FTSE All-World UCITS ETF USD Accumulation
-
TS Tesla Inc 0.67%
Part of fund(s):- LS 1x Tesla Tracker ETP Securities GBP
- Vanguard FTSE All-World UCITS ETF USD Accumulation
- Top 10 total 12.93%
Looking through ETF top holdings, the largest underlying exposures are well-known global giants like NVIDIA, Apple, Microsoft, Amazon, Alphabet, and Tesla. Even though each single name is small, repeated appearances across ETFs create a modest hidden concentration in these mega-cap leaders. This is normal for global equity portfolios today, as many indexes end up holding the same big companies. However, because only top-10 ETF holdings are captured, total overlap is likely understated. The key point is that while the portfolio leans to small value, it still has meaningful exposure to big global winners, which can help balance the behaviour of the more contrarian small-cap positions.
Factors
Factor exposures are estimated using statistical models based on historical data and measure systematic (market-relative) tilts, not absolute portfolio characteristics. Results may vary depending on the analysis period, data availability, and currency of the underlying assets.
Factor exposure shows very high value and very high low volatility tilts. Factors are characteristics like “cheap vs. expensive” or “steady vs. jumpy” that research suggests help explain returns. A strong value tilt means the portfolio leans toward cheaper stocks based on fundamentals; these can lag when expensive growth companies lead but may shine during rotations back to fundamentals. The strong low volatility tilt suggests a preference for steadier stocks that historically swing less than the market, which may help soften downside in some sell‑offs. Together, this creates a distinctive profile: contrarian and valuation‑focused, but with an embedded preference for relatively stable businesses rather than highly speculative names.
Risk contribution
-
Vanguard FTSE All-World UCITS ETF USD Accumulation
Weight: 58.33% 51.4% -
SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc EUR
Weight: 25.00% 32.5% -
SPDR® MSCI Europe Small Cap Value Weighted UCITS ETF EUR Acc
Weight: 16.67% 16.1%
Risk contribution looks at how much each holding adds to overall ups and downs, which can differ from simple weights. The global Vanguard ETF is about 58% of the portfolio but contributes roughly 51% of the risk, slightly less than proportional, reflecting its broad diversification. The US small-cap value ETF stands out: at 25% weight but over 32% of total risk, it punches above its size, consistent with smaller, more volatile companies. The European small-cap ETF’s risk is roughly in line with its weight. If desired, adjusting the size of the US small-cap sleeve would be the main lever to dial overall volatility up or down without changing the building blocks.
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.
On the risk‑return chart, the current portfolio sits right on or very near the efficient frontier. The efficient frontier represents the best expected return achievable for each level of risk using only these holdings with different weightings. The Sharpe ratio, which measures return per unit of risk, for the current mix is slightly below that of the optimal and minimum‑variance portfolios but very close. This means the existing allocation is already highly efficient; any improvements from reweighting would likely be modest. That is reassuring: the chosen balance between the global core and small‑cap value satellites is delivering near‑best possible risk‑adjusted returns given the three ETFs in use.
Ongoing product costs
- Vanguard FTSE All-World UCITS ETF USD Accumulation 0.19%
- SPDR® MSCI USA Small Cap Value Weighted UCITS ETF USD Acc EUR 0.30%
- SPDR® MSCI Europe Small Cap Value Weighted UCITS ETF EUR Acc 0.30%
- Weighted costs total (per year) 0.24%
The overall ongoing cost, with a combined TER around 0.24%, is impressively low for a portfolio with targeted factor tilts. TER, or total expense ratio, is the annual fee charged by the funds as a percentage of assets, quietly deducted within the ETF. Keeping this number low is powerful because fees compound just like returns, and every 0.1% avoided each year can add up significantly over decades. Here, the cost level is already in a very competitive range, especially considering the more specialized small‑cap value funds. That efficient cost base strongly supports long‑term performance without the drag seen in many actively managed or niche products.
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