A conservative portfolio with moderate diversification and a focus on global equity exposure

Report created on Dec 11, 2024

Risk profile Info

2/7
Conservative
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists predominantly of ETFs, with significant weight in global equity and bond assets. The HSBC MSCI World UCITS ETF and Xtrackers II EUR Overnight Rate Swap UCITS ETF account for the majority of holdings, making up over 69% of the portfolio. This composition suggests a focus on stable, broad-market exposure with a conservative tilt. While ETFs offer diversification, the concentration in a few funds may limit the portfolio's ability to capture niche market opportunities. To enhance diversification, consider incorporating more varied asset types or sectors, which could help balance risk and potentially improve returns.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 8.78%, with a maximum drawdown of -22.83%. This performance indicates relatively stable growth with some vulnerability to market downturns. Understanding past performance helps set expectations but does not guarantee future outcomes. Given the conservative risk profile, maintaining a diversified mix can help mitigate drawdowns. Regularly reviewing the portfolio to ensure it aligns with personal risk tolerance and financial goals is advisable, especially during volatile market conditions.

Projection Info

The Monte Carlo simulation projects potential future outcomes by running 1,000 scenarios based on historical data, showing a 50th percentile return of 213.81%. This method provides a range of possible future values, helping to visualize potential risks and rewards. However, projections are not predictions; they depend on historical trends, which may not repeat. To prepare for various market conditions, consider stress-testing the portfolio against different economic scenarios and adjusting allocations to manage risk effectively.

Asset classes Info

  • Stocks
    59%
  • Bonds
    35%
  • Other
    1%

Stocks make up approximately 59% of the portfolio, while bonds account for about 35%, reflecting a balanced allocation between growth and income-oriented assets. This mix aligns with a conservative strategy, aiming for steady returns with moderate risk. However, the limited allocation to other asset classes might restrict diversification benefits. Exploring alternative investments, such as real estate or commodities, could provide additional stability and reduce reliance on traditional asset classes.

Sectors Info

  • Technology
    16%
  • Financials
    9%
  • Health Care
    6%
  • Consumer Discretionary
    6%
  • Industrials
    6%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio is diversified across several sectors, with the largest exposure in technology and financial services. This sectoral allocation suggests a focus on growth industries, which can drive returns but may also increase volatility. Balancing sector exposure can help cushion against downturns in specific industries. Consider reallocating to underrepresented sectors to achieve a more balanced risk-return profile, especially if certain sectors are expected to perform differently in changing economic conditions.

Regions Info

  • North America
    44%
  • Europe Developed
    9%
  • Japan
    3%
  • Australasia
    1%
  • Asia Emerging
    1%
  • Asia Developed
    1%

The portfolio's geographic exposure is heavily weighted towards North America, accounting for over 43%. While this provides access to a large, developed market, it may expose the portfolio to regional risks. Diversifying geographically can mitigate these risks and capture growth opportunities in other regions. Increasing exposure to emerging markets or underrepresented areas like Europe or Asia could enhance diversification and potentially boost returns, especially if these regions experience economic growth.

Redundant positions Info

  • Vanguard FTSE All-World UCITS ETF
    iShares MSCI ACWI UCITS ETF
    iShares Core MSCI World UCITS ETF USD (Acc)
    HSBC MSCI World UCITS ETF
    High correlation

The assets in the portfolio exhibit high correlation, particularly among the global equity funds like Vanguard FTSE All-World and iShares MSCI ACWI. High correlation means that these assets tend to move in the same direction, reducing diversification benefits. To improve risk management, consider replacing highly correlated assets with those less likely to move together. This can help stabilize returns and protect against market volatility, especially during economic downturns.

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 can potentially be optimized using the Efficient Frontier, which seeks the best risk-return balance. This involves adjusting asset allocations to achieve maximum returns for a given level of risk. However, before optimization, addressing the high correlation between assets is crucial, as it limits diversification benefits. By reducing overlap and introducing less correlated assets, the portfolio can be better positioned on the Efficient Frontier, enhancing its efficiency and performance potential.

Dividends Info

  • HSBC MSCI World UCITS ETF 0.70%
  • Vanguard FTSE All-World UCITS ETF 1.20%
  • Weighted yield (per year) 0.45%

The portfolio's dividend yield is relatively low at 0.45%, reflecting its focus on growth-oriented ETFs. While dividends provide a steady income stream, growth assets can offer capital appreciation over time. For investors seeking income, increasing allocation to higher-yielding assets might be beneficial. Balancing growth and income can help achieve financial goals while maintaining portfolio stability, especially for those nearing retirement or in need of regular cash flow.

Ongoing product costs Info

  • iShares Core Corporate Bond UCITS 0.20%
  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • HSBC MSCI World UCITS ETF 0.15%
  • iShares $ Corp Bond UCITS ETF USD (Dist) 0.25%
  • iShares MSCI ACWI UCITS ETF 0.20%
  • Vanguard FTSE All-World UCITS ETF 0.22%
  • Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C 0.10%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, indicating low management costs, which is beneficial for long-term returns. Minimizing costs is crucial as fees can erode gains over time. Regularly reviewing and comparing fund fees can help maintain cost-efficiency. Consider replacing higher-cost funds with similar, lower-cost alternatives to optimize returns. Keeping an eye on expense ratios ensures more of the investment's growth benefits the investor rather than going towards fees.

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