A tech-heavy portfolio with strong North American focus and limited sector diversification

Report created on Dec 15, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of three Exchange Traded Funds (ETFs), with a significant focus on technology and North American markets. The Invesco EQQQ NASDAQ-100 UCITS ETF and the Vanguard S&P 500 UCITS ETF each account for 40% of the portfolio, while the Xtrackers MSCI World Information Technology UCITS ETF holds 20%. This composition indicates a strong concentration in equities, particularly within the technology sector. Understanding the portfolio's composition is crucial as it highlights the potential for high growth but also increased volatility due to sector concentration. Consider diversifying by adding assets from other sectors or regions to balance growth opportunities with risk.

Growth Info

The historical performance of this portfolio is impressive, with a Compound Annual Growth Rate (CAGR) of 19.06%. However, it also experienced a maximum drawdown of -20.15%, which illustrates potential volatility. If you had invested a hypothetical amount, say €10,000, this would have grown significantly over time, albeit with periods of substantial declines. Historical performance serves as a guide, but it's important to remember that past results do not guarantee future returns. It may be beneficial to assess your risk tolerance and consider strategies to mitigate potential drawdowns, such as diversifying or rebalancing your investments.

Projection Info

The Monte Carlo simulation, using 1,000 simulations, provides a forward-looking analysis of potential outcomes based on historical data. It suggests a wide range of possible returns, with a 5th percentile outcome of 330.63% and a 67th percentile of 1,729.54%. While the median outcome indicates a positive annualized return of 21.74%, these projections are based on historical correlations and volatilities. It's important to note that simulations are not predictions; they offer a range of possibilities. Consider using these insights to set realistic expectations and prepare for various market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of equities, which can lead to significant growth potential but also exposes it to market volatility. Having 100% in stocks means the portfolio can benefit from equity market rallies but is also vulnerable to downturns. Diversifying across different asset classes, such as bonds or real estate, can provide a buffer against equity market fluctuations. By mixing asset types, you can potentially reduce risk while maintaining opportunities for growth. Consider exploring other asset classes to enhance the portfolio's risk-return profile.

Sectors Info

  • Technology
    54%
  • Telecommunications
    10%
  • Consumer Discretionary
    10%
  • Health Care
    7%
  • Financials
    5%
  • Consumer Staples
    5%
  • Industrials
    5%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector analysis reveals a heavy concentration in technology, which accounts for over half of the portfolio. Other sectors such as communication services and consumer cyclicals have moderate representation, while sectors like energy and utilities are minimally included. This focus on technology can drive significant growth during tech booms but also increases exposure to sector-specific risks. It's important to balance sector allocation to avoid over-reliance on a single industry. Consider introducing more balanced sector exposure to mitigate potential risks associated with sector downturns.

Regions Info

  • North America
    97%
  • Europe Developed
    2%
  • Japan
    1%

The geographic allocation is overwhelmingly concentrated in North America, with 97.19% of the portfolio's assets. This lack of geographic diversity limits exposure to growth opportunities in other regions and increases vulnerability to North American market fluctuations. While North America has historically provided strong returns, diversifying geographically can help capture growth in emerging markets and reduce regional risks. Exploring investments in Europe, Asia, or other regions could enhance the portfolio's resilience and offer new avenues for growth.

Redundant positions Info

  • Xtrackers MSCI World Information Technology UCITS ETF 1C
    Invesco EQQQ NASDAQ-100 UCITS ETF Acc
    High correlation

The portfolio's assets, particularly the Invesco EQQQ NASDAQ-100 UCITS ETF and the Xtrackers MSCI World Information Technology UCITS ETF, are highly correlated. This means they tend to move together, which can amplify portfolio volatility during market swings. High correlation reduces the diversification benefits, as the assets do not provide a hedge against each other's movements. To manage risk more effectively, consider adding low-correlated or uncorrelated assets that can stabilize returns during market turbulence. This could include exploring other sectors or asset classes.

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's current structure could be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the allocation between existing assets rather than adding new ones. By optimizing, you can potentially enhance returns for a given level of risk or reduce risk for a desired return. However, the presence of highly correlated assets suggests that diversification might be more beneficial than optimization alone. Consider rebalancing the portfolio to achieve a more efficient and diversified allocation.

Ongoing product costs Info

  • Invesco EQQQ NASDAQ-100 UCITS ETF Acc 0.35%
  • Vanguard S&P 500 UCITS Acc 0.07%
  • Xtrackers MSCI World Information Technology UCITS ETF 1C 0.25%
  • Weighted costs total (per year) 0.22%

The total expense ratio (TER) of the portfolio is 0.22%, with the Vanguard S&P 500 UCITS Acc ETF being the most cost-effective at 0.07%. While the overall costs are relatively low, reducing expenses can further improve long-term returns. High costs can erode gains over time, so it's essential to keep them in check. Consider reviewing the cost structures of your investments and exploring lower-cost alternatives if available. Minimizing fees can enhance the compounding effect, ultimately boosting portfolio growth.

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