A balanced portfolio with heavy North American focus and significant financial sector exposure

Report created on Dec 19, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the Vanguard S&P 500 Index ETF, which constitutes over half of the entire portfolio. This implies a strong focus on large-cap U.S. equities. Additionally, two major Canadian banks, Royal Bank of Canada and Canadian Imperial Bank Of Commerce, make up over 30% of the portfolio. The remaining allocation is spread across two other ETFs, adding some diversification. A balanced risk profile suggests a moderate approach to risk, aiming for growth while managing potential downturns. The current asset allocation provides a solid foundation but could benefit from further diversification to mitigate risks associated with concentrated holdings.

Growth Info

Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 17.12%. However, it has also experienced significant volatility, with a maximum drawdown of -30.33%. This indicates that while the portfolio has the potential for high returns, it can also suffer considerable losses during market downturns. Understanding past performance helps set realistic expectations, but it's important to remember that past results are not indicative of future outcomes. Investors should ensure they are comfortable with the level of risk associated with such volatility.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance has been projected based on historical data. These simulations provide a range of possible outcomes, with the 50th percentile showing a potential return of 683.36%. Although simulations can offer insights, they rely on historical data and assumptions, which may not fully capture future market conditions. Investors should use these projections as a guide rather than a guarantee. It's essential to consider other factors like changing economic conditions and personal financial goals when planning for the future.

Asset classes Info

  • US Equity
    60%
  • Stocks
    31%
  • Stocks
    4%

The portfolio is predominantly invested in equities, with over 95% allocated across various equity asset classes. This high allocation to equities suggests a focus on capital appreciation rather than income generation. While equities can offer substantial growth potential, they also come with higher volatility compared to other asset classes like bonds or cash. To enhance diversification and potentially reduce risk, investors might consider incorporating other asset classes, such as fixed income or alternative investments, depending on their risk tolerance and investment goals.

Sectors Info

  • Financials
    41%
  • Technology
    21%
  • Health Care
    7%
  • Consumer Discretionary
    7%
  • Industrials
    6%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio has a significant concentration in the financial services sector, which accounts for over 40% of the total allocation. This heavy sectoral weighting could expose the portfolio to risks specific to the financial industry. While sectors like technology, healthcare, and consumer cyclicals are also represented, their allocations are notably smaller. Diversifying across more sectors could help mitigate sector-specific risks and provide a more balanced exposure to different economic cycles. Investors should evaluate whether their sectoral allocations align with their risk tolerance and market outlook.

Regions Info

  • North America
    96%
  • Europe Developed
    2%
  • Japan
    1%
  • Asia Emerging
    1%

Geographically, the portfolio is heavily skewed towards North America, with over 95% of assets allocated to this region. This concentration limits exposure to international markets, which could offer additional growth opportunities and diversification benefits. While North American markets have historically performed well, diversifying geographically can help reduce regional risks and capture potential growth in other parts of the world. Investors may want to consider increasing exposure to other regions to create a more globally balanced portfolio.

Redundant positions Info

  • Vanguard All-Equity ETF Portfolio
    iShares Core Equity Portfolio
    High correlation

The portfolio includes highly correlated assets, particularly between the Vanguard All-Equity ETF Portfolio and the iShares Core Equity Portfolio. High correlation means these assets tend to move in the same direction, reducing the diversification benefits they provide. In a well-diversified portfolio, assets should ideally have low correlation to balance out risks and enhance returns. Investors might consider replacing or reducing these overlapping holdings with assets that have lower correlation to improve diversification and manage overall portfolio risk more effectively.

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 could benefit from optimization using the Efficient Frontier, which helps identify the best possible risk-return ratio for a given set of assets. This process involves adjusting asset weights to achieve the most efficient portfolio, balancing risk and return. However, optimization is limited to the current assets and does not account for potential new investments. Investors should focus on reallocating existing assets to enhance efficiency while considering their risk tolerance and investment objectives. Regularly reassessing the portfolio can ensure it remains aligned with changing market conditions and personal goals.

Dividends Info

  • Canadian Imperial Bank Of Commerce 3.90%
  • Royal Bank of Canada 3.20%
  • Vanguard All-Equity ETF Portfolio 1.50%
  • Vanguard S&P 500 Index ETF 0.70%
  • iShares Core Equity Portfolio 1.50%
  • Weighted yield (per year) 1.71%

The portfolio's overall dividend yield is relatively modest at 1.71%, with the Canadian Imperial Bank Of Commerce and Royal Bank of Canada providing the highest yields. Dividends can be an important component of total returns, offering a steady income stream and potential protection against market volatility. While the focus appears to be on capital appreciation, incorporating higher-yielding assets could enhance income generation. Investors interested in boosting their portfolio's income should explore dividend-focused strategies that align with their financial goals and risk profile.

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