Balanced Portfolio with Strong U.S. Focus and Growth Potential but High Correlation Risks Present

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio is suitable for investors who have a balanced risk appetite and seek growth with moderate exposure to volatility. Such investors typically have a medium to long-term investment horizon and are comfortable with some market fluctuations. They aim for capital appreciation, leveraging broad market exposure, particularly in the U.S., while still benefiting from a diversified sector allocation. These investors value a mix of growth potential and income generation through dividends, ensuring their portfolio aligns with their financial goals and risk tolerance.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    35.00%
  • Invesco NASDAQ 100 ETF
    QQQM - US46138G6492
    20.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    20.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    15.00%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    10.00%

The portfolio consists of five ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 35% and the Invesco NASDAQ 100 ETF at 20%. The Vanguard Total International Stock Index Fund ETF Shares and Avantis U.S. Small Cap Value ETF also make up a substantial part of the portfolio, contributing 20% and 15% respectively. The Schwab U.S. Dividend Equity ETF rounds it out with a 10% allocation. This composition suggests a focus on broad market exposure, primarily in the U.S., with a tilt towards large-cap and growth-oriented stocks. This setup provides a solid foundation for balanced growth with moderate risk.

Growth Info

Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 15.28%. With a maximum drawdown of -24.52%, it indicates the portfolio is somewhat volatile, which is expected with a high equity exposure. The fact that 90% of returns come from just 21 days underscores the importance of staying invested to capture those key growth periods. This performance suggests a robust portfolio, but one that may need careful monitoring during market downturns. Maintaining this performance will require continued attention to market trends and potential rebalancing to mitigate risks.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, the portfolio's potential future performance was analyzed. This method uses random sampling to predict a range of possible outcomes. The results show a median projected return of 625.85%, with a 5th percentile outcome of 126.73% and a 67th percentile outcome of 930.92%. Impressively, 996 simulations resulted in positive returns, indicating a strong likelihood of future growth. However, it's important to remember that past performance doesn't guarantee future results. Regular reviews and adjustments may be needed to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%
  • Other
    0%
  • No data
    0%

The portfolio's asset allocation is heavily skewed towards stocks, making up 99.63% of the total, with minimal cash and other holdings. This concentration in equities aligns with a growth-focused strategy but does introduce higher volatility and risk. A more diversified asset class mix could potentially reduce risk, such as incorporating bonds or other fixed-income assets. This would provide a buffer during market downturns and contribute to more stable returns. Consideration of individual risk tolerance and investment goals is crucial when deciding on any adjustments to the asset allocation.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Industrials
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    6%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation within the portfolio is diverse, with a significant emphasis on technology at 26.38%, followed by financial services and consumer cyclicals. This suggests a growth-oriented approach, capitalizing on sectors with strong historical performance. However, this also introduces sector-specific risks, particularly if these industries face downturns. Balancing exposure across more sectors could mitigate these risks and provide more stable returns. It's important to regularly assess sector performance and trends to ensure the portfolio remains aligned with broader market movements and personal investment objectives.

Regions Info

  • North America
    80%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%
  • Europe Emerging
    0%

Geographically, the portfolio is predominantly focused on North America, accounting for 80.48% of the allocation. This heavy U.S. exposure aligns with the portfolio's strong performance but also introduces concentration risk. Limited exposure to other regions like Europe and Asia suggests potential for broader geographic diversification. Expanding the geographic scope could capture growth opportunities in emerging markets and reduce dependency on the U.S. economy. However, it's vital to weigh the potential benefits against the risks, such as currency fluctuations and geopolitical instability, when considering geographic diversification.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio exhibits high correlation between certain assets, notably the Invesco NASDAQ 100 ETF and Vanguard S&P 500 ETF. This correlation suggests that these assets tend to move in the same direction, which can amplify both gains and losses. While this can lead to strong performance during market upswings, it also increases vulnerability during downturns. Diversifying with assets that have lower correlations could enhance the portfolio's risk-adjusted returns. This approach would help in achieving a more balanced risk profile and potentially smoother performance over time.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.70%

The portfolio offers a moderate dividend yield of 1.7%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.4%. This provides a steady income stream, which can be appealing for those seeking regular returns. However, the focus is more on growth than income, given the portfolio's composition. For investors looking to increase their income from dividends, exploring additional high-yield investments could be beneficial. It's important to balance the desire for income with growth objectives, ensuring the portfolio aligns with long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.10%

The total expense ratio (TER) for the portfolio is 0.1%, reflecting low investment costs. This is a significant advantage, as lower costs can enhance overall returns over time. The Vanguard S&P 500 ETF and Schwab U.S. Dividend Equity ETF contribute to this low cost structure with their minimal fees. Keeping investment costs low is crucial for maximizing net returns. Regularly reviewing and optimizing the cost efficiency of the portfolio can ensure that more of the investment's returns are retained. This is a key consideration for long-term investment success.

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.

The portfolio optimization chart suggests that optimization might not be necessary at this stage due to the high correlation between assets. The focus should be on maintaining the current balance and considering diversification to reduce correlation risks. Moving along the efficient frontier could help achieve a more conservative or riskier portfolio, depending on personal preferences. To pursue a more conservative strategy, incorporating fixed-income assets could reduce volatility. Conversely, for a riskier approach, increasing exposure to high-growth sectors might be considered. Prioritizing these areas could enhance the portfolio's overall performance.

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