A globally diversified ETF portfolio with balanced risk and low costs

Report created on Dec 29, 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 entirely invested in the Vanguard FTSE All-World ex-US Index Fund ETF Shares, which provides broad exposure to international markets outside the USA. This single ETF covers a wide range of sectors and regions, leading to a broadly diversified classification. While this setup offers simplicity and ease of management, it lacks exposure to U.S. markets, which could affect overall market performance alignment. To enhance diversification, consider adding complementary assets that include U.S. equities or other asset classes such as bonds or real estate investment trusts (REITs).

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 6.65%, which is a solid performance for a globally diversified ETF. However, the maximum drawdown of nearly 35% indicates significant volatility during market downturns. This performance is in line with typical international equity benchmarks, which often experience higher fluctuations compared to domestic-focused portfolios. To mitigate potential drawdowns, consider incorporating assets with lower volatility or defensive characteristics to stabilize returns during turbulent periods.

Projection Info

The Monte Carlo simulation, which uses historical data to project future performance, suggests a median return of 110.67% over the investment horizon. While it provides a range of possible outcomes, it's important to remember that simulations have limitations and cannot predict future market conditions. The simulation shows a high likelihood of positive returns, with 869 out of 1,000 simulations yielding gains. To increase the probability of achieving desired outcomes, periodically review and adjust the portfolio based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, accounting for nearly 99% of the assets, with minimal allocations to cash and other asset classes. This concentration in equities can lead to higher growth potential but also increases exposure to market volatility. Compared to a balanced benchmark, which typically includes bonds or other fixed-income securities, this portfolio is more aggressive. Consider diversifying into different asset classes to reduce risk and smooth out returns, especially if a more stable income stream is desired.

Sectors Info

  • Financials
    22%
  • Industrials
    14%
  • Technology
    13%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Basic Materials
    7%
  • Consumer Staples
    7%
  • Telecommunications
    6%
  • Energy
    5%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is well-distributed, with notable weights in financial services, industrials, and technology. This balance aligns with global benchmarks, providing exposure to various economic sectors. However, the portfolio's heavy reliance on financial and industrial sectors may lead to increased sensitivity to economic cycles. To mitigate this risk, consider adjusting sector weights to reflect personal market outlooks or reduce exposure to cyclical sectors during periods of economic uncertainty.

Regions Info

  • Europe Developed
    39%
  • Asia Emerging
    16%
  • Japan
    16%
  • Asia Developed
    11%
  • North America
    7%
  • Australasia
    5%
  • Africa/Middle East
    3%
  • Latin America
    2%
  • Europe Emerging
    1%

Geographic exposure is diverse, with significant allocations to Europe Developed, Asia Emerging, and Japan. This distribution provides broad international exposure, but the underweighting in North America might limit access to U.S. growth opportunities. Compared to global benchmarks, this portfolio leans more towards non-U.S. markets. To achieve a more balanced geographic allocation, consider increasing exposure to North American equities or other regions that align with your investment strategy and risk tolerance.

Dividends Info

  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.60%

The portfolio yields a dividend of 1.6%, which contributes to total returns and provides a modest income stream. While this yield is in line with global equity averages, it may not be sufficient for income-focused investors. Dividends can help cushion against market volatility and provide cash flow, making them an important consideration for those seeking regular income. To boost dividend income, consider incorporating high-yielding assets or funds into the portfolio.

Ongoing product costs Info

  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from a low total expense ratio (TER) of 0.07%, thanks to the Vanguard FTSE All-World ex-US Index Fund ETF's cost-effective structure. Low costs are advantageous for long-term investors, as they help maximize net returns by minimizing fees. This cost efficiency aligns with best practices for reducing investment expenses. To maintain this advantage, regularly review the portfolio for potential cost-saving opportunities, such as switching to lower-fee alternatives if available.

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