A balanced portfolio with strong growth potential and moderate diversification

Report created on Mar 6, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio comprises five ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 36.36%. This is complemented by the Invesco NASDAQ 100 ETF and three other ETFs, each making up around 18% or less. The high allocation to large-cap U.S. equities suggests a focus on stability and growth. Compared to a typical balanced portfolio, this one leans heavily on U.S. equities, which can be both a strength and a limitation, depending on market conditions. To boost diversification, consider incorporating more international or fixed-income assets.

Growth Info

Historically, the portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 15.03%, outperforming many benchmarks. However, it has also experienced a maximum drawdown of -23.94%, indicating vulnerability during market downturns. These figures suggest a high-growth potential but with notable volatility. While past performance can guide expectations, it is not a guaranteed predictor of future results. To mitigate risk, consider strategies like dollar-cost averaging or setting aside a cash reserve for downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential outcomes, shows an annualized return of 17.31% with 996 out of 1,000 simulations yielding positive returns. This suggests a strong probability of future growth, but remember, simulations are based on historical data and assumptions that may not hold true in the future. Given the positive outlook, maintaining current allocations could be beneficial, but regularly reviewing market conditions and adjusting as necessary is wise.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, lacking diversification across asset classes. While this focus on equities can drive growth, it also increases exposure to market volatility. A balanced portfolio typically includes bonds or other asset classes to mitigate risk. Comparing to benchmark norms, this portfolio is more aggressive. Consider introducing fixed-income assets to reduce risk and provide more stability, especially during equity market downturns.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

With a 33% allocation to technology, the portfolio is heavily weighted towards this sector, which can lead to higher volatility, especially during periods of interest rate hikes. Other sectors like financial services and healthcare are also represented but to a lesser extent. This sector concentration aligns with recent market trends but could lead to increased risk if the tech sector faces challenges. To enhance stability, consider diversifying into underrepresented sectors.

Regions Info

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

The portfolio's geographic exposure is predominantly in North America, accounting for 96% of the allocation. This concentration limits global diversification and exposes the portfolio to regional risks. Compared to common benchmarks, this is heavily U.S.-focused. To mitigate potential risks associated with such concentration, consider increasing exposure to regions like Europe or emerging markets, which can offer growth opportunities and reduce reliance on the U.S. market.

Market capitalization Info

  • Large-cap
    43%
  • Mega-cap
    33%
  • Mid-cap
    21%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio is diversified across market capitalizations, with a strong emphasis on big and mega-cap stocks, which together make up 76% of the allocation. This focus provides stability and growth potential but may limit exposure to the higher growth potential of small and micro-cap stocks. Although large-cap stocks are generally more stable, consider slightly increasing allocation to smaller-cap stocks to enhance growth potential and diversification.

Redundant positions Info

  • Schwab U.S. Dividend Equity ETF
    Vanguard Value Index Fund ETF Shares
    High correlation

The Schwab U.S. Dividend Equity ETF and Vanguard Value Index Fund ETF Shares are highly correlated, meaning they tend to move together. This correlation can limit diversification benefits, especially during market downturns. While correlated assets can offer stability, they may not provide the diversification needed to mitigate risks effectively. Consider reducing overlap by replacing one of these with an asset that offers different exposure or characteristics.

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's current structure could potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. However, optimization should focus on the current assets and their allocations. Consider removing highly correlated assets like the Schwab U.S. Dividend Equity ETF and Vanguard Value Index Fund ETF Shares to enhance diversification. Remember, efficiency is about maximizing returns for a given level of risk, not necessarily achieving broad diversification.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Defiance Quantum 0.60%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Value Index Fund ETF Shares 2.20%
  • Weighted yield (per year) 1.64%

With a total dividend yield of 1.64%, the portfolio provides moderate income, primarily from the Schwab U.S. Dividend Equity ETF, which yields 3.50%. Dividends can offer a stable income stream, which is beneficial during volatile market periods. For investors seeking income, this yield is reasonable, but there may be opportunities to increase it by reallocating to higher-yielding assets. Balancing growth with income can enhance overall portfolio performance.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Defiance Quantum 0.40%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is impressively low at 0.09%, supporting better long-term performance by minimizing costs. This cost efficiency is a significant advantage, as lower expenses mean more of your returns are retained. Compared to industry standards, this TER is highly competitive. To maintain this advantage, continue to monitor expense ratios and consider switching to lower-cost alternatives if available, ensuring costs remain minimized.

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