A balanced portfolio with a strong focus on global equity diversification

Report created on Nov 21, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three ETFs, with a significant 80% allocation to the iShares Core MSCI World UCITS ETF. This provides broad exposure to developed markets. The remaining 20% is split between emerging markets and small-cap stocks, each at 10%. This composition aligns with a balanced investment strategy, offering global exposure while maintaining a focus on equities. Compared to typical benchmarks, this portfolio leans heavily on developed markets, which may limit exposure to higher growth opportunities in emerging markets. Consider diversifying further by slightly increasing emerging market exposure to capture potential growth.

Growth Info

The portfolio has shown a strong historical performance with a CAGR of 11.60%. This indicates robust growth over time, outperforming many traditional benchmarks. However, it also experienced a maximum drawdown of -34.08%, highlighting periods of significant volatility. This volatility is typical for equity-heavy portfolios, particularly during market downturns. Investors should be aware that while past performance is promising, it does not guarantee future results. To mitigate future drawdowns, consider incorporating assets with lower volatility, such as bonds, if risk tolerance allows.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, indicate a wide range of potential returns. With 1,000 simulations, the 5th percentile shows a modest 7.7% increase, while the median (50th percentile) projects a 184.1% return. These projections highlight the uncertainty and potential variability in future returns. While the simulations suggest a positive outlook, it's important to remember that they are based on past data and assumptions. Regularly reviewing and adjusting the portfolio based on changing market conditions can help optimize future performance.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of equities, providing no exposure to other asset classes such as bonds or real estate. This concentration in stocks can lead to higher volatility but also offers potential for higher returns. Compared to diversified benchmarks, this lack of asset class diversification could increase risk during market downturns. Including other asset classes might reduce risk and enhance long-term stability. Consider adding fixed-income or alternative investments to balance the portfolio and improve risk-adjusted returns.

Sectors Info

  • Technology
    24%
  • Financials
    17%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio has a notable concentration in the technology sector at 24%, followed by financial services and industrials. This sectoral allocation is common in global equity portfolios, reflecting the significant market capitalization of tech companies. However, this concentration might lead to increased volatility, especially during interest rate hikes or tech sector downturns. To mitigate sector-specific risks, consider diversifying further into underrepresented sectors like utilities or real estate, which can provide stability and income.

Regions Info

  • North America
    66%
  • Europe Developed
    15%
  • Japan
    6%
  • Asia Emerging
    5%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America at 66%, with Europe Developed and Japan making up most of the remainder. This allocation reflects the dominance of these regions in global markets. However, the limited exposure to emerging markets and other regions may restrict growth opportunities. Increasing the allocation to Asia Emerging or Latin America could enhance diversification and capture potential growth in these developing regions, balancing the portfolio's geographic risk.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    31%
  • Mid-cap
    19%
  • Small-cap
    6%
  • Micro-cap
    1%

The portfolio predominantly comprises mega and big-cap stocks, representing 73% of the total allocation. This focus on large-cap companies offers stability and less volatility compared to small-cap stocks. However, small and micro-cap stocks, though only 7% of the portfolio, can provide higher growth potential. To optimize growth potential, consider slightly increasing the allocation to small-cap stocks, while being mindful of the increased risk and volatility associated with them.

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 be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the allocation between the existing assets to maximize returns for a given level of risk. While the current allocation is balanced, exploring different combinations of asset weights may uncover opportunities for better efficiency. Keep in mind that "efficiency" focuses on optimizing risk and return, not necessarily achieving diversification across asset classes or sectors.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • iShares MSCI World Small Cap UCITS ETF USD (Acc) 0.35%
  • Weighted costs total (per year) 0.21%

The portfolio's total expense ratio (TER) is 0.21%, which is relatively low and beneficial for long-term performance. Lower costs mean more of your money is working for you, enhancing compounding returns over time. This cost efficiency aligns with best practices in portfolio management. However, always be vigilant for any changes in fees or additional costs. Periodically reviewing the costs and considering any lower-cost alternatives can help maintain or improve net returns without sacrificing quality.

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