Balanced Portfolio with Strong Diversification and Efficient Frontier Positioning for UK-Based Investors

Report created on Aug 6, 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: Vanguard S&P 500 UCITS Acc, iShares Core MSCI Emerging Markets IMI UCITS, and Amundi Stoxx Europe 600 UCITS ETF C GBP. With 50% allocated to the S&P 500, 25% to Emerging Markets, and 25% to Europe, it offers a balanced exposure to global markets. This composition reflects a diversified approach, allowing participation in different economic cycles and geographical regions. The allocation is well-suited for a balanced risk profile, providing a solid foundation for potential growth while managing risk through diversification.

Growth Info

A hypothetical initial investment in this portfolio would have yielded a compound annual growth rate (CAGR) of 11.73%, demonstrating strong historical performance. The maximum drawdown of -31.97% highlights the potential volatility and risk associated with market downturns. The portfolio's ability to recover and generate positive returns over time suggests resilience and effective diversification. Investors should be aware of the potential for drawdowns, but the overall historical performance indicates a well-constructed portfolio with the potential for long-term growth.

Projection Info

Using a Monte Carlo simulation, which models a range of possible outcomes by simulating random variables, the portfolio's future performance was analyzed. Assuming a hypothetical initial investment, the simulation projects a 50th percentile return of 227.7% and a 67th percentile return of 353.26%. With 959 out of 1,000 simulations showing positive returns, the portfolio demonstrates a high likelihood of future growth. Investors should understand that while the simulation provides a range of outcomes, actual performance may vary based on market conditions and other factors.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.76% of the allocation in equities. This high concentration in stocks suggests a focus on capital appreciation and long-term growth, typical of a balanced risk profile. The minimal allocation to cash and other asset classes indicates a low emphasis on liquidity and income generation. While this equity-focused approach can lead to higher returns, it also exposes the portfolio to market volatility. Investors may consider diversifying into other asset classes to reduce risk and increase stability.

Sectors Info

  • Technology
    24%
  • Financials
    17%
  • Health Care
    11%
  • Industrials
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Basic Materials
    4%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio's sector allocation is diverse, with significant exposure to technology, financial services, and healthcare. Technology leads at 24.17%, followed by financial services at 16.83%, and healthcare at 10.53%. This sector distribution reflects a growth-oriented strategy, capitalizing on sectors with strong potential for innovation and expansion. While this allocation provides diversification across industries, investors should be mindful of sector-specific risks and consider periodic reviews to ensure alignment with market trends and personal investment goals.

Regions Info

  • North America
    50%
  • Europe Developed
    25%
  • Asia Emerging
    13%
  • Asia Developed
    7%
  • Africa/Middle East
    3%
  • Latin America
    2%
  • Europe Emerging
    1%

Geographically, the portfolio is diversified across North America, Europe, and Asia. North America holds the largest share at 49.93%, followed by Europe Developed at 25.12% and Asia Emerging at 12.51%. This geographic distribution offers exposure to both developed and emerging markets, balancing stability with growth potential. Such diversification helps mitigate region-specific risks and captures opportunities in various economic environments. Investors should continue to monitor geopolitical and economic developments that may impact regional performance.

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 currently positioned on the efficient frontier, indicating an optimal balance between risk and return for its current configuration. However, the optimal portfolio, with a higher expected return of 16.12% and a risk level of 18.37%, suggests room for improvement. Investors might explore adjusting their risk preferences to align with their financial goals and market outlook. Understanding the efficient frontier concept helps investors make informed decisions about risk-return trade-offs and portfolio adjustments.

Ongoing product costs Info

  • iShares Core MSCI Emerging Markets IMI UCITS 0.18%
  • Amundi Stoxx Europe 600 UCITS ETF C GBP 0.07%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Weighted costs total (per year) 0.10%

The total expense ratio (TER) for the portfolio is a low 0.1%, reflecting cost-efficient management. With individual ETF costs ranging from 0.07% to 0.18%, the portfolio minimizes expenses, allowing more returns to be reinvested. Keeping costs low is crucial for long-term investment success, as high fees can erode returns over time. Investors should continue to prioritize cost-effective solutions and regularly review expense ratios to ensure the portfolio remains competitively priced and aligned with their financial objectives.

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