A balanced portfolio with a strong focus on US equities and emerging market exposure
Report created on Dec 27, 2024Risk profile
4/7
Diversification profile
3/5
Positions
-
VU Vanguard S&P 500 UCITS Acc
VUAA - IE00BFMXXD54 79.00% -
FL Franklin Libertyshares ICAV - Franklin Ftse India Ucits ETF
FLXI - IE00BHZRQZ17 21.00%
This portfolio is heavily weighted towards equities, with 79% in the Vanguard S&P 500 UCITS Acc ETF and 21% in the Franklin FTSE India UCITS ETF. Such a structure indicates a significant emphasis on large-cap US stocks, complemented by exposure to emerging markets via Indian equities. In comparison to common benchmarks, this portfolio shows a strong bias towards US equities, which is typical for many balanced profiles. However, the limited diversification across asset classes could expose the portfolio to higher volatility. Consider integrating a broader range of asset types, such as bonds or real estate, to enhance stability and reduce potential risks.
Growth
Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.67%. This suggests strong growth, likely driven by the robust performance of US equities. The maximum drawdown of -35.15% indicates significant volatility, reflecting the inherent risks of a stock-heavy portfolio. While past performance is not indicative of future results, this historical data highlights the potential for substantial gains, albeit with notable risk. To mitigate such risks, consider diversifying into less volatile asset classes, which could help cushion the impact of market downturns.
Projection
Using Monte Carlo simulation, which applies historical data to project future outcomes, the portfolio shows promising potential. With an annualized return of 16.73% across simulations, the results suggest strong future growth prospects. The simulation's 5th percentile outcome of 108.61% indicates a high likelihood of positive returns. However, it's crucial to remember that these projections are not guarantees and are based on historical trends. Diversifying the asset allocation further could help manage risk and ensure more consistent outcomes across varying market conditions.
Asset classes
- Stocks 100%
The portfolio is overwhelmingly concentrated in stocks, with 99.72% of assets in equities. This heavy allocation can drive growth but also increases exposure to market volatility. Compared to typical balanced portfolios, which often include bonds or other fixed-income securities, this portfolio is less diversified across asset classes. Introducing a mix of bonds or alternative investments could provide a buffer against market fluctuations, offering a more balanced risk-return profile and potentially enhancing long-term stability.
Sectors
- Technology 29%
- Financials 16%
- Consumer Discretionary 11%
- Health Care 10%
- Industrials 8%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 5%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
Sector allocation shows a pronounced concentration in technology, comprising 28.56% of the portfolio. Other significant sectors include financial services and consumer cyclicals. This sectoral tilt can lead to higher volatility, especially during economic shifts affecting these industries. In comparison to common benchmarks, this portfolio aligns with a tech-heavy bias, which has historically been a strong performer but can also be sensitive to interest rate changes. Consider diversifying sector exposure to include more defensive sectors, which may offer stability during market downturns.
Regions
- North America 79%
- Asia Emerging 21%
Geographically, the portfolio is heavily weighted towards North America, with 78.54% exposure, and has a notable allocation to emerging Asia, primarily India. This geographic focus can benefit from the growth potential of these regions but may also increase susceptibility to regional economic shifts. Compared to global benchmarks, there is a significant underrepresentation of Europe and developed Asia. Expanding geographic diversification could reduce regional risk and capitalize on growth opportunities in underrepresented markets.
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 composition may benefit from optimization using the Efficient Frontier concept, which seeks the best possible risk-return ratio. This involves adjusting the allocation between existing assets to achieve maximum returns for a given level of risk. While the current allocation is growth-focused, exploring slight adjustments could enhance efficiency without significantly altering the portfolio's risk profile. This process doesn't inherently improve diversification but optimizes the existing asset mix.
Ongoing product costs
- Franklin Libertyshares ICAV - Franklin Ftse India Ucits ETF 0.19%
- Vanguard S&P 500 UCITS Acc 0.07%
- Weighted costs total (per year) 0.10%
The portfolio boasts impressively low costs, with a Total Expense Ratio (TER) of 0.1%. This is a strong advantage, as lower costs can significantly enhance net returns over time by minimizing fee-related drag on performance. Compared to industry averages, these costs are well below typical levels, supporting better long-term growth. Maintaining low costs should remain a priority, as even small fee reductions can compound significantly over extended investment horizons.
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