Balanced portfolio with strong US focus and tech sector concentration

Report created on Dec 31, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed primarily of equities, with a significant 45% allocation to the Vanguard S&P 500 ETF. This ETF is a popular choice for broad market exposure, representing a large portion of the US stock market. The remaining investments are spread across other ETFs, including a notable 12% in VanEck Semiconductor ETF, which indicates a tilt towards the technology sector. This composition aligns with a balanced profile, though it leans heavily on US equities. A well-diversified portfolio typically includes a mix of asset classes, such as bonds, to mitigate risk. Consider adjusting the allocation to include more bonds or other asset classes to further balance risk and return.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 13.58%. This figure suggests strong growth, especially compared to typical benchmark indices. However, the portfolio also experienced a maximum drawdown of -32.27%, indicating vulnerability during market downturns. While past performance can provide insights, it's important to remember that it doesn't guarantee future results. To manage potential risks, consider strategies like diversification or rebalancing to protect against significant losses during volatile periods.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a median return of 311.44%. Monte Carlo simulations use historical data to model future performance, offering a spectrum of possibilities. While the 50th percentile indicates positive growth, the 5th percentile warns of potential lower returns. It's crucial to understand that these projections are not predictions but rather scenarios that help assess risk. Consider maintaining a diversified portfolio and regularly reviewing it to adapt to changing market conditions and potential risks.

Asset classes Info

  • Stocks
    94%
  • Bonds
    6%

The portfolio is heavily weighted towards stocks, comprising over 93% of the total allocation. This high concentration in equities suggests a growth-oriented strategy, but it also increases exposure to market volatility. In contrast, bonds only make up about 6% of the portfolio, providing limited income and risk mitigation. Diversification across asset classes can enhance stability and reduce risk. Consider increasing the allocation to bonds or other non-equity assets to achieve a more balanced risk-return profile, especially if seeking more consistent returns.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Health Care
    10%
  • Industrials
    8%
  • Consumer Discretionary
    8%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    2%

The sector allocation reveals a significant concentration in technology, which accounts for over 33% of the portfolio. While this can drive growth during tech booms, it may also lead to increased volatility, particularly during periods of rising interest rates or tech sector downturns. The financial services and healthcare sectors also have notable allocations, providing some balance. To mitigate sector-specific risks, consider diversifying further across other sectors, ensuring the portfolio remains resilient against sector-specific downturns.

Regions Info

  • North America
    76%
  • Europe Developed
    5%
  • Asia Developed
    5%
  • Asia Emerging
    4%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, with nearly 76% of assets allocated there. This concentration offers familiarity and stability but limits exposure to international growth opportunities. While developed markets like Europe and Asia are represented, emerging markets have minimal allocation. Diversifying geographically can reduce regional risks and capture growth from different parts of the world. Consider increasing exposure to underrepresented regions to enhance diversification and potential returns.

Redundant positions Info

  • Vanguard Value Index Fund ETF Shares
    Vanguard S&P 500 ETF
    iShares Core Dividend Growth ETF
    High correlation

The portfolio exhibits high correlation among some assets, particularly between the Vanguard S&P 500 ETF, Vanguard Value Index Fund ETF Shares, and iShares Core Dividend Growth ETF. Highly correlated assets tend to move together, which can limit diversification benefits during market downturns. Reducing overlap among these assets can help achieve better diversification and risk management. Consider substituting some of these correlated assets with others that have lower correlation to improve the portfolio's overall resilience.

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 can be optimized for risk versus return using the Efficient Frontier, which identifies the best possible risk-return ratio. Currently, the portfolio has overlapping assets that could be adjusted to improve efficiency. The Efficient Frontier helps determine the optimal asset allocation based on historical data, but it's essential to note that this doesn't guarantee future results. Consider reallocating assets to achieve a more efficient balance, focusing on diversification and reducing correlations to enhance the overall risk-return profile.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • iShares Core Dividend Growth ETF 2.30%
  • iShares Core MSCI Emerging Markets ETF 1.00%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Value Index Fund ETF Shares 1.70%
  • Weighted yield (per year) 1.40%

The portfolio's overall dividend yield stands at 1.4%, with contributions from several ETFs, including a 3.7% yield from the Vanguard Total Bond Market Index Fund ETF Shares. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. However, the current yield is relatively modest, reflecting the portfolio's growth orientation. If income generation is a priority, consider reallocating towards higher-yielding assets while balancing the need for growth and risk management.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • iShares Core Dividend Growth ETF 0.08%
  • iShares Core MSCI Emerging Markets ETF 0.09%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, with most ETFs having minimal fees. Low costs are beneficial as they enhance net returns over time, allowing more of your investment to compound. The VanEck Semiconductor ETF has the highest expense ratio at 0.35%, which might be worth reviewing. Consider whether lower-cost alternatives could achieve similar exposure and performance. Maintaining low costs is a strong strategy for long-term success, so continue to monitor and optimize fees where possible.

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