Balanced Portfolio with High North American Exposure and Notable Sector Concentration

Report created on Nov 25, 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 primarily composed of five ETFs, with the Vanguard S&P 500 ETF taking up a significant 50% portion. This is followed by the Invesco NASDAQ 100 ETF at 20%, making the portfolio heavily weighted towards large-cap U.S. equities. The remaining allocation is split between a bond ETF and two other equity ETFs, emphasizing growth and dividend appreciation. This composition indicates a strong focus on U.S. markets and a balanced approach between growth and income, with some exposure to bonds for stability.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 13.24%. However, it experienced a maximum drawdown of -25.93%, indicating significant volatility during downturns. This performance suggests that while the portfolio has delivered impressive returns, it has also been exposed to considerable risk. The portfolio's reliance on a few key days for most of its returns highlights the importance of staying invested for the long term to capture these gains.

Projection Info

Using a Monte Carlo simulation, which models potential future outcomes based on historical data, the portfolio shows a wide range of possible returns. With a hypothetical initial investment, the projected annualized return is 11.05%, with 967 out of 1,000 simulations showing positive returns. The 50th percentile projection suggests a strong potential for growth, yet there's still a possibility of lower-than-expected returns. This highlights the inherent uncertainty in investing and the need for a diversified approach to manage risks.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%

The portfolio's asset class distribution is predominantly in stocks, accounting for nearly 90% of the allocation. Bonds make up just under 10%, providing a modest level of stability. This allocation reflects a balanced investor profile, aiming for growth while maintaining some risk management through bond exposure. The minimal cash component indicates a focus on keeping funds actively invested rather than holding liquid assets.

Sectors Info

  • Technology
    31%
  • Health Care
    11%
  • Consumer Discretionary
    9%
  • Financials
    9%
  • Telecommunications
    8%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is heavily skewed towards technology, which constitutes over 31% of the portfolio. Other notable sectors include healthcare, consumer cyclicals, and financial services. This concentration in technology suggests a focus on growth sectors, which can drive returns but also bring volatility. Diversifying across more sectors could help mitigate risks associated with sector-specific downturns, providing a more balanced risk-return profile.

Regions Info

  • North America
    89%
  • Europe Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, accounting for over 89% of the allocation. This exposes the portfolio to region-specific economic conditions and market trends. With minimal exposure to other regions, the portfolio could benefit from increased geographic diversification to capture growth opportunities in international markets and reduce reliance on North American economic performance.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    Vanguard Dividend Appreciation Index Fund ETF Shares
    High correlation

The portfolio shows high correlation among its equity components, particularly between the Invesco NASDAQ 100 ETF, Vanguard S&P 500 ETF, and Vanguard Dividend Appreciation Index Fund ETF Shares. This suggests limited diversification benefits, as these assets tend to move in the same direction. Reducing overlap and adding less correlated assets could enhance diversification, potentially improving risk-adjusted returns and reducing portfolio volatility.

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.

Before optimizing, focus on reducing overlapping assets that offer little diversification benefit. By aligning the portfolio along the efficient frontier, investors can achieve a riskier or more conservative stance. This involves adjusting the mix of stocks and bonds to match risk tolerance and financial goals. A more conservative portfolio would increase bond allocation, while a riskier one would lean more towards equities. Balancing between growth and stability is key to optimizing the portfolio's risk-return profile.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • iShares Russell 2000 Growth ETF 0.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.31%

The portfolio's dividend yield stands at 1.31%, with contributions from all ETFs, particularly the Vanguard Total Bond Market Index Fund ETF Shares at 3.6%. This yield provides a modest income stream, complementing the portfolio's growth focus. While not a primary income generator, dividends can offer some stability, especially during market downturns. Investors seeking higher income might consider adjusting the allocation towards higher-yielding assets, balancing growth and income objectives.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • iShares Russell 2000 Growth ETF 0.24%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

With a total expense ratio (TER) of 0.08%, the portfolio is cost-efficient, minimizing the impact of fees on returns. The low costs are primarily due to the selection of ETFs with competitive expense ratios, such as the Vanguard S&P 500 ETF and Vanguard Total Bond Market Index Fund ETF Shares. Keeping investment costs low is crucial for maximizing net returns over time, and this portfolio is well-positioned in that regard. Regularly reviewing and optimizing for cost efficiency can further enhance performance.

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