A well-balanced portfolio consists of low-risk and high-risk assets. Adjust the risk portion of your portfolio to your personal risk capacity and your investment horizon.
The investment period largely determines the expected return of a portfolio. With a short investment period you have to expect a high volatility especially in the risk component. The longer your investing horizon is, the higher may be an appropriate risk rate you choose. Time is on your side.
A historic analysis of a diversified portfolio can help you to choose the right level of risk. The simulation shows you the historic range of drawdowns and returns of a diversified portfolio with an equivalent risk rate, like the one you selected.
A diversified portfolio consists of low risk and high risk assets. Adjust the risk portion of your portfolio to your personal risk capacity and your investment horizon.
You can see the historical performance of a diversified portfolio with your chosen risk ratio. The analysis shows how high the (interim) drawdowns and the returns between 1996 and 2016 were. The analysis thus considers two of the greatest economic crises of the past 50 years (burst of dot-com bubble & the global financial crisis). These insights can be helpful for choosing your personal portfolio mix.
Investing is not always pleasant. Ask yourself the following questions: If my own portfolio experienced the losses of 2008 would I still have been able to sleep well? Had I been inclined to cut my losses and "save" the remaining assets? Would I have been able to watch my portfolio lose value for several consecutive years in a row, after the bursting of the dot-com bubble?
If you answered "Yes" on one or more of these questions, please reduce your risk rate!
The analysis reflects the perspective of an Euro investor. All returns are calculated in Euro. Foreign currencies are not being hedged.
Please note: Past performance is not a reliable indication of future performance.
The simulated equity/bond portfolio reflects an investment in global equity markets and German government bonds. The risk allocation matches the risk portion you have selected (Risk Profile slider above). The equity allocation is represented by the MSCI World index (global equities from developed countries). The fixed income allocation consists of German government bonds (RexP).
Example with 50% risk allocation:
50% German government bonds, 50% equities worldwide
Maximum drawdown is a measure of risk. It measures the largest temporary losses, which occurred at some point of time within a time period.
In the analysis an annual rebalancing takes place. This prevents the portfolio weights of deviating too much from the starting level.
The model resets the respective equity allocation annually to the starting level. Year 2008 for example: Stocks lose value while government bonds rise. Now the model sells parts of the government bonds in order to increase the equity portion with the proceeds. When stocks are rising - stocks shares are sold accordingly.
The time series used for the analysis reach from January 1996 to December 2015 (20 years). All calculations are based on monthly figures.
German government bonds: Rex Performance index, Source: German Bundesbank
Developed market equities: MSCI World Gross index, Source: MSCI
The conversion of US dollar investments into Euros is done via a synthetic EUR/USD exchange rate. USD/DM exchange rate until 01.01.1999, thereafter EUR/USD exchange rate. Source: ECB
The risk share of a portfolio mainly consists of company stocks. We show you strategies, which allow you to easily invest in hundreds or even thousands of companies worldwide with just a few ETFs. The strategies differ in number of positions needed and investment focus.
For easy evaluation, we have added information on diversification and concentration.
|No. of constituents||No. of countries|
|< 100 constituents||< 15 countries|
|100 - 500 constituents||15 - 25 countries|
|> 500 constituents||> 25 countries|
|Weight of top 3 countries|
|50% - 70%|
Commodities offer the chance to strenghten the risk/return profile of your portfolio.
Commodities include energy (e.g. oil, gas), agricultural products (e.g. wheat, corn), l ive cattle, industrial metals (e.g. aluminium, copper) and precious metals (e.g. gold, silver).
Precious metals, especially gold, have an exceptional position among commodities. It is highly valued by investors in times of crisis. Besides a broad-diversified commodities basket, gold by itself can be a very interesting portfolio building block.
Set the commodity slider to 0%, if you do not want commodities within your portfolio.
|No. of commodities||No. of segments|
|< 5 commodities||1 segment|
|5 - 15 commodities||2 segments|
|> 15 commodities||> 3 segments|
|Weight of Top 3 commodities|
|50% - 70%|
Fixed-income securities in domestic currency are the "low risk" component of a portfolio. They are also known as bonds. Investors grant a loan to governments or companies and therefore receive interest payments.
Fixed-income usually has a significantly lower volatility than stocks. However, this does not mean they are risk free. This part of the portfolio may also lead to losses.
Government bonds offer the best credit quality. More yield, but also more risk, is provided by foreign government bonds and corporate bonds. An alternative to fixed-income securities are bank deposits.
For a better evaluation of the different strategies, you find more information on the duration and credit quality of the underlying securities.