Balanced Risk Portfolio with Single-Focused Diversification and High Technology Sector Exposure for Moderate Growth

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 suits an investor who seeks moderate growth with a balanced risk profile. They likely have a medium to long-term investment horizon and are comfortable with some market volatility. This investor values diversification but may need to enhance it across sectors and geographies. They appreciate the growth potential of equities, particularly in technology, but should be mindful of concentration risks. A moderate risk tolerance suggests they can withstand short-term fluctuations while aiming for steady growth over time.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    50.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    15.00%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF
    AVLV - US0250723493
    10.00%
  • iShares Bitcoin Trust
    IBIT
    10.00%
  • iShares U.S. Technology ETF
    IYW - US4642877215
    10.00%
  • iShares Expanded Tech-Software Sector ETF
    IGV - US4642875151
    5.00%

The portfolio is composed of six different ETFs, with a strong emphasis on U.S. equities. The Vanguard S&P 500 ETF makes up 50% of the portfolio, providing broad market exposure. The remaining assets are spread across small-cap value, large-cap value, Bitcoin, and technology-focused ETFs. This composition suggests a preference for growth with a moderate level of risk. It is important to maintain diversification to mitigate risks associated with market volatility. Consider evaluating the allocation to ensure it aligns with long-term financial goals and risk tolerance.

Warning The historical data covers less than 2 years, which reduces the confidence in the calculated values.

Growth Info

The historical performance of the portfolio shows a strong CAGR of 35.43%, indicating robust growth potential. However, the max drawdown of -10.54% highlights the risk of significant short-term losses. This volatility is common in portfolios with a high equity concentration, especially in technology. Understanding these fluctuations is crucial for managing expectations. It's advisable to maintain a balanced approach, potentially considering more stable assets to cushion against future downturns and to ensure a smoother investment journey.

Warning Due to limited historical data, this may show extreme values that are not realistic.

Projection Info

A Monte Carlo simulation was conducted with 1,000 iterations, assuming a hypothetical initial investment. This method uses random sampling to project potential future outcomes. The median projection yielded a 21,551.37% return, indicating substantial growth potential. However, the wide range of outcomes, from 3,567.86% to 35,678.95%, underscores the uncertainty inherent in market investments. While the simulation suggests promising returns, it's essential to remain aware of potential risks. Diversifying further could help stabilize returns and minimize downside risk over time.

Asset classes

  • Stocks
    90%
  • Other
    10%
  • Cash
    0%

The portfolio is predominantly composed of stocks, accounting for nearly 90% of the total allocation. This heavy stock weighting suggests a growth-oriented approach but also exposes the portfolio to market volatility. The remaining allocation includes a small percentage in Bitcoin and cash. For a more balanced risk profile, consider incorporating other asset classes, such as bonds or real estate, to enhance diversification. This can help reduce volatility and provide more consistent returns over the long term, aligning with a balanced investment strategy.

Sectors

  • Technology
    32%
  • Financials
    13%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Health Care
    6%
  • Energy
    5%
  • Consumer Staples
    4%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

With 32% of the portfolio allocated to the technology sector, there is a significant concentration risk. While tech stocks have historically delivered strong returns, they can also be volatile. The remaining sectors, such as financial services and consumer cyclicals, provide some diversification but are relatively underrepresented. It's crucial to monitor sector allocations to ensure they align with risk tolerance and investment objectives. Diversifying across sectors can help mitigate risks associated with sector-specific downturns and contribute to a more resilient portfolio.

Regions

  • North America
    89%
  • Europe Developed
    0%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

The portfolio's geographic composition is heavily skewed towards North America, with 89.26% of assets based there. This concentration may limit exposure to growth opportunities in other regions. While U.S. markets have been strong performers, diversifying geographically can offer additional growth potential and reduce regional risk. Consider exploring opportunities in developed and emerging markets to enhance global diversification. This strategy can help tap into different economic cycles and provide a buffer against regional market downturns, contributing to a well-rounded investment approach.

Redundant positions

  • iShares U.S. Technology ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio exhibits high correlation between certain assets, particularly the iShares U.S. Technology ETF and the Vanguard S&P 500 ETF. This correlation suggests that these assets tend to move in tandem, which can increase portfolio risk during market downturns. While some correlation is expected, excessive overlap can undermine diversification efforts. It's advisable to review the portfolio for redundant holdings and consider reallocating to less correlated assets. This can enhance diversification and potentially improve risk-adjusted returns over time.

Dividends

  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 1.50%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • iShares Expanded Tech-Software Sector ETF 0.30%
  • iShares U.S. Technology ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.03%

The portfolio's total dividend yield is 1.03%, with the highest contributions from the American Century and Avantis U.S. Large Cap Value ETFs at 1.5%. While not a significant income source, dividends can provide a modest buffer against market volatility. For investors seeking higher income, consider increasing exposure to dividend-focused assets. However, ensure this aligns with overall investment goals and risk tolerance. Balancing growth and income needs is crucial for constructing a portfolio that supports long-term financial objectives while providing some cash flow stability.

Ongoing product costs

  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Bitcoin Trust 0.12%
  • iShares Expanded Tech-Software Sector ETF 0.41%
  • iShares U.S. Technology ETF 0.40%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio is relatively low at 0.14%, with the Vanguard S&P 500 ETF contributing the least at 0.03%. Keeping costs low is crucial for maximizing net returns over time. While expense ratios are generally reasonable, it's essential to remain vigilant about any changes. Regularly reviewing the cost structure ensures that investment expenses remain aligned with expectations and do not erode returns. Consider periodically comparing costs with similar investment options to ensure competitiveness and optimize net performance.

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.

Portfolio optimization involves aligning investments along the efficient frontier to achieve the best risk-return trade-off. However, this portfolio contains highly correlated assets, limiting optimization potential. While the current composition offers growth opportunities, it's not fully optimized for risk management. Consider diversifying further across asset classes and sectors to improve portfolio efficiency. By reducing correlation and enhancing diversification, the portfolio can potentially achieve better risk-adjusted returns, aligning with a balanced investment approach and long-term financial goals.

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