A balanced portfolio with global exposure and a focus on developed markets

Report created on Feb 9, 2025

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 the iShares Core MSCI World UCITS ETF and SPDR MSCI ACWI IMI UCITS ETF each making up 41.67% and the Vanguard FTSE Developed Europe ex UK UCITS ETF at 16.67%. This structure showcases a focus on broad market exposure, primarily in developed markets. Compared to a typical balanced benchmark, this portfolio leans heavily on equities, which can offer substantial growth but also increased volatility. Consider diversifying into other asset classes like bonds or real estate to reduce risk and enhance stability.

Growth Info

Historically, the portfolio has delivered a CAGR of 11.80%, indicating strong growth over time. However, it experienced a significant maximum drawdown of -33.98%, highlighting periods of high volatility. Compared to benchmarks, this performance suggests a solid growth trajectory but with notable risks during downturns. While past performance is not indicative of future results, maintaining a diversified approach can help mitigate potential losses in volatile markets.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With a 5th percentile outcome of 51.8% and a 50th percentile of 317.1%, the projections imply substantial variability. This variability highlights the inherent uncertainty in market predictions, emphasizing the importance of diversification and risk management. While the annualized return across simulations is 11.83%, it's crucial to remember that simulations cannot predict future market conditions with certainty.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which can drive growth but also increase risk due to lack of diversification. In comparison to a balanced benchmark, this allocation lacks exposure to other asset classes like bonds or cash, which can offer stability and income. To align more closely with a balanced investment strategy, consider integrating other asset classes to cushion against market volatility and enhance overall portfolio resilience.

Sectors Info

  • Technology
    24%
  • Financials
    17%
  • Industrials
    12%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation shows a concentration in technology (24%) and financial services (17%), with other sectors like industrials and healthcare also well-represented. This distribution aligns with common benchmarks but could lead to higher volatility, especially if tech sectors face downturns. To mitigate sector-specific risks, consider rebalancing to maintain a more even distribution across sectors, ensuring that no single sector dominates the portfolio's risk profile.

Regions Info

  • North America
    60%
  • Europe Developed
    28%
  • Japan
    4%
  • Asia Emerging
    2%
  • Asia Developed
    2%
  • Australasia
    2%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is heavily weighted towards North America (60%), with Europe Developed (28%) also significant. This exposure aligns with global benchmarks but may lack the diversification benefits of emerging markets. While developed markets offer stability, incorporating more emerging market exposure could enhance growth potential and reduce reliance on North American market performance, boosting overall diversification.

Market capitalization Info

  • Mega-cap
    45%
  • Large-cap
    34%
  • Mid-cap
    17%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio is predominantly invested in large-cap stocks, with 45% in mega caps and 34% in big caps. This focus on larger companies offers stability and reduced volatility but may limit growth opportunities compared to small-cap investments. While large-cap stocks are typically more reliable, consider increasing exposure to smaller companies to potentially capture higher growth rates and improve diversification.

Redundant positions Info

  • SSgA SPDR ETFs Europe I Public Limited Company - SPDR MSCI ACWI IMI UCITS ETF
    iShares Core MSCI World UCITS ETF USD (Acc)
    High correlation

The ETFs in the portfolio are highly correlated, particularly the iShares Core MSCI World UCITS ETF and the SPDR MSCI ACWI IMI UCITS ETF. This high correlation suggests limited diversification benefits, as these assets tend to move together. To enhance risk management, consider diversifying into less correlated assets, which can help reduce portfolio volatility and improve overall performance during market downturns.

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 allocation may not be on the Efficient Frontier, which represents the best risk-return trade-off. By optimizing the allocation of existing assets, the portfolio could achieve a better balance between risk and return. This process involves adjusting weights to maximize returns for a given level of risk, rather than simply adding more assets. Consider revisiting asset weights to align closer to the Efficient Frontier.

Ongoing product costs Info

  • iShares Core MSCI World UCITS ETF USD (Acc) 0.20%
  • SSgA SPDR ETFs Europe I Public Limited Company - SPDR MSCI ACWI IMI UCITS ETF 0.40%
  • Vanguard FTSE Developed Europe ex UK UCITS 0.10%
  • Weighted costs total (per year) 0.27%

The total expense ratio (TER) for the portfolio is 0.27%, which is relatively low and supports long-term performance by minimizing costs. Keeping expenses low is crucial for maximizing returns, as high fees can erode gains over time. This cost efficiency aligns well with best practices, allowing more of the investment's returns to compound over the years, benefiting the overall growth of the portfolio.

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