At inbestMe, we offer a full range of target portfolios. We have options with maturities in 2026, 2027 and 2028, both in euros and US dollars for ETF portfolios, and a portfolio of index funds with a 2028 maturity in euros.
The following table shows some metrics of some of our target portfolios in ETFs from 09/15/2023 to 12/31/2024, in euros and US dollars (except for 2028 with a start date of 11/30/2024):
Important note: Past performance is no guarantee of future performance.
Important note: Past performance is no guarantee of future performance.
As can be seen, all the portfolios have accumulated positive returns and have a high CAGR/Volatility ratio (this implies that they have obtained high returns for the amount of risk assumed). All of them have so far met the expectations for which they were created: to offer attractive CAGRs by setting them for a specific period.
The following charts show the evolution of 100 euros or US dollars invested on 29/09/2023 in the different ETF target portfolios vs. the Inverco benchmark that we use for this type of portfolio:
Important note: Past performance is no guarantee of future performance.
Important note: Past performance is no guarantee of future performance.
And here we can see the same for 100 euros invested on 04/22/2024 in our Target Portfolio of Index Funds maturing at the end of 2026:
Important note: Past performance is no guarantee of future performance.
In the following chart, we can see the evolution of 100 euros invested at the end of September 2023 in the target portfolio of ETFs maturing in 2025 in euros. At that time, the IRR of the portfolio was approximately 3%. As can be seen, for the moment, the dark blue line has always been within the intervals defined by the different scenarios proposed, and is currently above the central scenario. This trend should continue until the time of the portfolio’s maturity, when the red (central scenario) and dark blue (portfolio evolution) lines should converge.
Important note: Past performance is no guarantee of future performance.
Thus, for example, an investor who buys a target portfolio today with a yield of 3.5% as of December 2027 has a reasonable certainty of obtaining that annualized return on that maturity date.
Why do we say that investors can be “reasonably confident”?
Because some of the bonds could be downgraded and replaced within the portfolio and some issuers could default on their obligations. Given the high diversification of issuers within the funds, these (unlikely) events should have a limited impact on risk and return.
At the same time, not all bonds mature, in this example, exactly in December 2027. Some may mature a little earlier, so they will have to be invested by the fund issuer in money market instruments while waiting for the fund to mature. This could cause the yield to deviate slightly from 3.5%, but not by much.
A target portfolio is especially useful for investors who have a defined goal within the next few years. Let’s say you need 100,000 Euros to buy a house in 4 years. In this case, it would be very useful to have a reasonable certainty about the return you will get from your portfolio to ensure that this 100,000 Euros will be available when you need it. It would not be advisable to invest all the money in stocks, as a stock portfolio can fluctuate a lot over time. In this case, it would be better to have a target bond portfolio, where the return can be known in advance. This option would be more suitable than a traditional bond portfolio, where the return can fluctuate over time.
Appendix: Brief explanation of the table metrics
- Cumulative return: total return obtained in the mentioned time interval.
- CAGR: total return obtained in the mentioned time interval in annual terms.
- 2024 return: cumulative return from 1/1/2024 to 12/31/2024
- Volatility: annual volatility of daily returns.
- CAGR/Volatility: expresses the annual return per unit of risk.
- Yield: yield to maturity of the portfolio as of 06/28/2024. It is the weighted average return of the bonds contained in the portfolio. A client who invests in the portfolio today and holds it until maturity will be reasonably sure of obtaining a return very close to the IRR.
- Expected return to maturity: total return that a client who buys the portfolio today can expect to accumulate between now and its maturity.
- Duration: sensitivity of the portfolio to the variation in returns. Duration shows roughly how much the fund’s price would change for a 1% change in yields. The higher the number, the more sensitive the fund’s value is to movements in yields.
