Balanced Portfolio with Single-Focused Diversification and Moderate Risk Level for Long-Term Growth

Report created on Jul 2, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is composed of five ETFs, each holding 20% of the total investment. It is a balanced profile with a moderate risk score of 4 out of 7. The diversification classification is single-focused, indicating that the portfolio is concentrated in specific areas. This composition suggests a focus on growth while maintaining a level of stability. The equal allocation across these ETFs implies a strategy aimed at balancing risk across different sectors and asset classes. To enhance diversification, consider including more varied asset classes or investment vehicles.

Growth Info

Historically, this portfolio has shown a strong performance with a compound annual growth rate (CAGR) of 11.45%. However, it experienced a significant maximum drawdown of -34.9%, which highlights the potential for volatility. The high returns concentrated in just 29 days of the year suggest that timing plays a crucial role in this portfolio's success. This performance indicates that while the portfolio has potential for growth, it also carries the risk of substantial short-term losses. To mitigate this, consider strategies that could reduce volatility and protect against large drawdowns.

Projection Info

Using a Monte Carlo simulation, which runs numerous hypothetical scenarios to predict future outcomes, this portfolio shows promising growth potential. With a 50th percentile outcome of 311.49% and an annualized return of 12.08%, the portfolio is likely to perform well over time. However, there is a 5th percentile outcome of only 26.93%, indicating some downside risk. This simulation suggests that while the portfolio has a high probability of achieving substantial returns, it is still susceptible to market fluctuations. Diversifying further could help in reducing the downside risk.

Asset classes Info

  • Stocks
    60%
  • Real Estate
    20%
  • No data
    19%

The portfolio is heavily weighted towards stocks at 60.49%, with real estate making up 20% and a small portion in cash and other assets. This allocation suggests a growth-oriented strategy with some stability provided by real estate. The significant stock allocation indicates exposure to market volatility, while real estate can offer income and diversification benefits. To balance growth and risk, consider increasing the allocation in less volatile asset classes, such as bonds, to cushion against market downturns.

Sectors Info

  • Real Estate
    21%
  • Utilities
    19%
  • Technology
    17%
  • Health Care
    11%
  • Industrials
    7%
  • Consumer Discretionary
    6%
  • Financials
    6%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Basic Materials
    2%
  • Energy
    1%

The portfolio spans multiple sectors, with real estate, utilities, and technology having the largest allocations. While this sector allocation provides exposure to various market segments, it is still somewhat concentrated. This concentration could lead to higher volatility if these sectors underperform. Diversifying into other sectors, such as energy or consumer defensive, could help mitigate sector-specific risks and provide a more balanced exposure to different economic cycles.

Regions Info

  • North America
    99%

Geographically, the portfolio is heavily concentrated in North America, with 99.49% of assets. This concentration limits exposure to international markets, which could offer diversification benefits and opportunities for growth. By expanding the geographic allocation to include more developed and emerging markets, the portfolio could reduce regional risk and take advantage of global economic growth. Consider exploring international ETFs to add geographic diversity to the portfolio.

Redundant positions Info

  • VanEck Morningstar Wide Moat ETF
    Invesco S&P 500® Equal Weight ETF
    High correlation

The portfolio shows high correlation between the VanEck Morningstar Wide Moat ETF and the Invesco S&P 500® Equal Weight ETF. This indicates that these assets tend to move in the same direction, offering little diversification benefit. High correlation can increase risk during market downturns as these assets may fall simultaneously. To enhance diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio, thus reducing overall risk.

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 optimization chart suggests focusing on reducing asset overlap before attempting further optimization. By addressing the high correlation between certain assets, the portfolio can achieve better diversification and risk management. Moving along the efficient frontier, investors can adjust their risk level by reallocating towards more conservative or riskier assets. A more conservative approach might involve increasing bonds or other low-risk assets, while a riskier strategy could focus on increasing equity exposure. This step is crucial in aligning the portfolio with the investor's risk tolerance and financial goals.

Dividends Info

  • iShares Russell Top 200 Growth ETF 0.50%
  • VanEck Morningstar Wide Moat ETF 0.70%
  • iShares Preferred and Income Securities ETF 6.10%
  • Invesco S&P 500® Equal Weight ETF 1.40%
  • Vanguard Real Estate Index Fund ETF Shares 3.70%
  • Weighted yield (per year) 2.48%

The portfolio's dividend yield stands at 2.48%, with the iShares Preferred and Income Securities ETF contributing significantly at 6.1%. This yield provides a steady income stream, which can be particularly beneficial during periods of market volatility. While the dividends enhance the portfolio's return potential, they also expose it to interest rate risks. To maintain a balance between capital appreciation and income, consider evaluating the dividend sustainability and exploring other income-generating assets that align with the portfolio's risk profile.

Ongoing product costs Info

  • iShares Russell Top 200 Growth ETF 0.20%
  • VanEck Morningstar Wide Moat ETF 0.47%
  • iShares Preferred and Income Securities ETF 0.46%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Weighted costs total (per year) 0.29%

With a total expense ratio of 0.29%, the portfolio's costs are relatively low, which is beneficial for long-term growth as it minimizes the impact of fees on returns. Each ETF has a different cost structure, with the Vanguard Real Estate Index Fund ETF Shares having the lowest expense ratio at 0.12%. Keeping investment costs low is crucial in maximizing net returns over time. Regularly review the expense ratios and consider substituting higher-cost funds with lower-cost alternatives to further enhance cost efficiency without compromising the portfolio's strategy.

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