A balanced and broadly diversified portfolio with a focus on global equities and moderate risk
Report created on Dec 8, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VW Vanguard FTSE All-World UCITS ETF USD Accumulation
VWCE - IE00BK5BQT80 50.00% -
VU Vanguard S&P 500 UCITS ETF
VUSA - IE00B3XXRP09 20.00% -
6A Amundi Index Solutions - Amundi Nasdaq-100 ETF-C EUR
6AQQ - LU1681038243 10.00% -
IS iShares Core MSCI Emerging Markets IMI UCITS
IS3N - IE00BKM4GZ66 10.00% -
IU iShares MSCI World Small Cap UCITS ETF USD (Acc)
IUSN - IE00BF4RFH31 10.00%
The portfolio consists primarily of equity ETFs, with a significant 50% allocation to the Vanguard FTSE All-World UCITS ETF. This indicates a strong focus on global equity markets. Other notable allocations include the Vanguard S&P 500 UCITS ETF at 20% and smaller allocations to emerging markets and small-cap equities. The composition suggests a robust equity-oriented strategy, with limited exposure to other asset classes like bonds or cash. Understanding this composition is crucial, as it highlights the portfolio's susceptibility to global equity market trends. To enhance diversification, consider integrating other asset classes, such as bonds, to reduce volatility and potential drawdowns.
Growth
Historically, this portfolio has shown a strong performance with a compound annual growth rate (CAGR) of 14.0%. However, it also experienced a significant maximum drawdown of -33.42%, indicating vulnerability during market downturns. This performance suggests a high-reward, high-risk profile typical of equity-heavy portfolios. While past performance can offer insights, it doesn't guarantee future outcomes. Investors should be prepared for potential volatility. To mitigate risks, consider incorporating strategies like dollar-cost averaging or setting stop-loss orders to protect against significant losses during downturns.
Projection
The Monte Carlo simulation projects a wide range of potential outcomes for the portfolio, with a 50th percentile end value of 479.16% and a 5th percentile at 90.81%. This method uses historical data to simulate thousands of possible future scenarios, providing a probabilistic outlook. While the results are promising, with 998 out of 1,000 simulations showing positive returns, it's important to remember that simulations are based on past data and assumptions, which may not capture future market conditions. Regularly reviewing and adjusting the portfolio in response to market changes can help align it with evolving financial goals.
Asset classes
- Stocks 100%
The portfolio is heavily weighted towards equities, comprising nearly 100% of the allocation, with negligible exposure to other asset classes like bonds or cash. This concentration in equities can drive higher returns during market upswings but also increases vulnerability to downturns. Diversifying across asset classes can help balance risk and return. Consider introducing fixed income or alternative investments to reduce volatility and provide stability during market fluctuations. A more balanced approach may offer a smoother ride over time, aligning with a broader range of investment goals and risk tolerances.
Sectors
- Technology 28%
- Financials 14%
- Consumer Discretionary 11%
- Industrials 10%
- Health Care 10%
- Telecommunications 9%
- Consumer Staples 6%
- Basic Materials 4%
- Energy 4%
- Real Estate 3%
- Utilities 3%
Sector allocation reveals a heavy concentration in technology, representing approximately 28% of the portfolio. Other significant sectors include financial services and consumer cyclicals. This sectoral concentration may lead to increased volatility, especially if specific industries face downturns. While technology has been a strong performer, overexposure can lead to significant risks. Diversifying into underrepresented sectors, such as utilities or consumer defensives, can provide a buffer against sector-specific downturns. Regularly reviewing sector allocations can help maintain a balanced exposure aligned with market conditions and investment objectives.
Regions
- North America 69%
- Europe Developed 9%
- Asia Emerging 8%
- Asia Developed 5%
- Japan 4%
- Africa/Middle East 2%
- Latin America 1%
- Australasia 1%
The portfolio's geographic allocation is predominantly in North America, which accounts for nearly 69% of the total. This reflects a strong reliance on U.S. markets, potentially limiting exposure to other growth opportunities worldwide. While the U.S. has been a robust market, geopolitical risks or economic downturns could impact returns. Diversifying geographically by increasing allocations to Europe, Asia, or emerging markets can enhance resilience and capture global growth. This approach can mitigate regional risks and provide a more balanced global exposure, aligning with a diversified investment strategy.
Redundant positions
-
High correlationVanguard FTSE All-World UCITS ETF USD AccumulationVanguard S&P 500 UCITS ETF
The portfolio contains highly correlated assets, particularly between the Vanguard FTSE All-World and Vanguard S&P 500 ETFs. High correlation means these assets tend to move together, offering limited diversification benefits. While correlated assets can enhance returns during market upswings, they also increase risk during downturns. To improve risk management, consider reducing exposure to highly correlated assets and introducing less correlated instruments. This can help smooth out returns and reduce the portfolio's overall volatility, aligning with a balanced investment approach.
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 ratio. Current allocations may not fully leverage this concept due to high correlation between certain assets. By adjusting allocations within the existing asset pool, the portfolio could achieve a more favorable balance between risk and return. This involves reallocating funds from highly correlated assets to those offering diversification benefits. Regularly re-evaluating the portfolio against the Efficient Frontier can ensure it remains aligned with optimal risk-return parameters.
Dividends
- Vanguard S&P 500 UCITS ETF 0.80%
- Weighted yield (per year) 0.16%
The portfolio's overall dividend yield is relatively low at 0.16%, with the Vanguard S&P 500 UCITS ETF contributing 0.8%. While dividends can provide a steady income stream, this portfolio's focus is primarily on capital appreciation. Investors seeking income might find the yield insufficient to meet their needs. To boost income, consider incorporating higher-yielding assets or dividend-focused funds. Balancing growth and income can create a more well-rounded portfolio, appealing to investors seeking both capital gains and regular cash flow.
Ongoing product costs
- Amundi Index Solutions - Amundi Nasdaq-100 ETF-C EUR 0.23%
- iShares Core MSCI Emerging Markets IMI UCITS 0.18%
- iShares MSCI World Small Cap UCITS ETF USD (Acc) 0.35%
- Vanguard S&P 500 UCITS ETF 0.07%
- Vanguard FTSE All-World UCITS ETF USD Accumulation 0.22%
- Weighted costs total (per year) 0.20%
The portfolio's total expense ratio (TER) is 0.2%, reflecting low costs typical of ETFs. Lower costs can significantly enhance long-term returns by minimizing the drag on performance. While the portfolio is cost-efficient, ongoing monitoring of expenses is essential. Consider reviewing the cost-effectiveness of each holding periodically, as well as exploring other low-cost options that align with investment goals. Reducing costs where possible can improve net returns, contributing to the portfolio's overall efficiency and success.
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