Balanced Risk Portfolio with Predominant North American Exposure and Strong Historical Performance
Report created on Aug 7, 2024Risk profile
4/7
Diversification profile
1/5
Positions
-
SX iShares Core S&P 500 UCITS ETF USD (Acc)
SXR8 - IE00B5BMR087 80.00% -
EU iShares Global Aggregate Bond UCITS Dist
EUNU - IE00B3F81409 20.00%
The portfolio is composed of two main ETFs: iShares Core S&P 500 UCITS ETF USD (Acc) and iShares Global Aggregate Bond UCITS Dist. The S&P 500 ETF makes up 80% of the portfolio, while the bond ETF comprises 20%. This allocation indicates a balanced approach, focusing heavily on equities with some exposure to bonds for risk mitigation. Such a composition can offer growth potential from equities while providing stability from bonds. To improve diversification, consider adding more asset classes or regions to reduce concentration risk.
Growth
Historically, the portfolio has shown a CAGR of 12.87%, which is quite impressive. The maximum drawdown recorded was -28.97%, reflecting the potential volatility in the equity-heavy allocation. With only 34 days making up 90% of returns, the portfolio has experienced significant fluctuations. This performance highlights the importance of staying invested through market ups and downs. To maintain this performance, continue monitoring the portfolio and consider periodic rebalancing to align with investment goals.
Projection
Using a Monte Carlo simulation with a hypothetical initial investment, the portfolio's projected returns show an annualized return of 8.14%. The simulation ran 1,000 iterations, with 985 scenarios resulting in positive returns. This suggests a high likelihood of achieving positive performance in the future. Monte Carlo simulations are useful for understanding potential outcomes by modeling various economic scenarios. It's advisable to regularly review these projections to ensure that they align with your risk tolerance and financial objectives.
Asset classes
- Stocks 80%
- Bonds 20%
The portfolio is primarily invested in stocks, with 79.91% allocated to equities and 19.84% in bonds. This allocation reflects a balanced risk profile, targeting growth while managing volatility. A small cash component of 0.23% provides liquidity but is negligible overall. Diversifying into other asset classes, such as real estate or commodities, could further enhance risk management and potentially improve returns. It's important to periodically reassess the asset mix to ensure it remains aligned with financial goals and risk tolerance.
Sectors
- Technology 26%
- Financials 11%
- Consumer Discretionary 9%
- Health Care 9%
- Telecommunications 7%
- Industrials 6%
- Consumer Staples 4%
- Energy 3%
- Utilities 2%
- Real Estate 2%
- Basic Materials 1%
Sector allocation is concentrated, with technology leading at 26.5%, followed by financial services and consumer cyclicals. This concentration can lead to higher volatility if specific sectors underperform. While technology has been a strong performer historically, it's crucial to consider the risks of sector concentration. Broadening exposure across more sectors could help mitigate risks and smooth returns. Regularly reviewing sector performance and adjusting allocations as needed can help maintain a balanced and diversified portfolio.
Regions
- North America 80%
Geographically, the portfolio is heavily weighted towards North America, with 79.54% exposure. This concentration can lead to geographic risk, especially if the region faces economic challenges. The remaining exposure is minimal in developed Europe and Asia, indicating limited geographic diversification. To reduce risk, consider increasing exposure to other regions, such as emerging markets or Europe. Diversifying geographically can help capture growth opportunities in different economies and reduce reliance on any single market.
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 is close to the efficient frontier, indicating it is well-optimized for the current risk level. However, to achieve an optimal portfolio with higher expected returns and risk, adjustments could be made. Moving along the efficient frontier can help tailor the risk-return profile to better match individual preferences. For those seeking a more conservative approach, increasing bond allocation might be beneficial. Conversely, increasing equity exposure can raise potential returns but also risk. Regularly reviewing and optimizing the portfolio can ensure it remains aligned with financial objectives.
Dividends
- iShares Global Aggregate Bond UCITS Dist 1.50%
- Weighted yield (per year) 0.30%
The portfolio's total dividend yield is 0.3%, primarily from the iShares Global Aggregate Bond UCITS Dist, which yields 1.5%. This yield is relatively low, reflecting the focus on growth rather than income. For investors seeking regular income, this portfolio may not meet expectations. However, reinvesting dividends can enhance long-term growth. If income generation is a priority, consider adding higher-yielding assets or funds to the portfolio. Regularly reviewing dividend policies and yields can help align with income needs.
Ongoing product costs
- iShares Global Aggregate Bond UCITS Dist 0.10%
- iShares Core S&P 500 UCITS ETF USD (Acc) 0.12%
- Weighted costs total (per year) 0.12%
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