A balanced portfolio with strong US focus and moderate sector diversification

Report created on Dec 23, 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 primarily composed of ETFs, with the Vanguard S&P 500 ETF holding the largest weight at 47.6%. This is followed by the Invesco NASDAQ 100 ETF at 28.6%, Schwab U.S. Dividend Equity ETF at 14.2%, and Vanguard Total International Stock Index Fund ETF at 9.6%. This composition leans heavily on US equities, particularly large-cap stocks. Compared to common benchmarks, this portfolio has a strong focus on established US markets. To enhance diversification, consider incorporating a broader range of asset classes or increasing international exposure. A more balanced allocation could mitigate risks associated with market-specific downturns.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 14.46%, indicating strong performance. However, it experienced a maximum drawdown of -26.12%, highlighting potential volatility. Comparing this to common benchmarks like the S&P 500, the portfolio aligns closely in terms of growth but shows vulnerability during downturns. Understanding that past performance does not guarantee future results, it's crucial to maintain a diversified strategy to cushion against similar drawdowns. Regularly reviewing the portfolio's performance against benchmarks can help identify areas for improvement.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a 50th percentile return of 391.2% and an annualized return of 13.63%. With 996 out of 1,000 simulations showing positive returns, the outlook appears optimistic. However, remember that simulations are based on past data and can't predict future market conditions. Consider using these projections as a guide rather than a guarantee. Regularly reassessing the portfolio's alignment with personal goals and market conditions can ensure it remains on track.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising 99.6% of the allocation, with minimal cash and other assets. This concentration in equities is typical for growth-focused strategies but may expose the portfolio to higher volatility. Compared to a balanced benchmark, which might include bonds or alternative assets, this allocation lacks diversification. To reduce risk and improve stability, consider incorporating a mix of asset classes. Adding fixed-income securities or alternative investments can provide a buffer against equity market fluctuations.

Sectors Info

  • Technology
    33%
  • Consumer Discretionary
    12%
  • Financials
    11%
  • Telecommunications
    10%
  • Health Care
    10%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation is tech-heavy, with technology making up 33% of the portfolio. Other significant sectors include consumer cyclicals, financial services, and communication services. This concentration in technology may lead to higher volatility, especially during interest rate hikes or tech sector downturns. Compared to broader benchmarks, the portfolio's sector distribution is somewhat unbalanced. Consider diversifying across more sectors to reduce risk. A more even distribution can help mitigate the impact of sector-specific downturns and provide more stable returns.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is concentrated in North America, with 90% exposure. This leaves minimal allocation to other regions like Europe, Asia, and Latin America. Such concentration can limit the benefits of geographic diversification, which typically helps mitigate risks associated with regional economic downturns. Compared to global benchmarks, this portfolio is underexposed to international markets. Consider increasing exposure to diverse regions to enhance diversification. A more global approach can provide access to growth opportunities in emerging markets and reduce reliance on the US economy.

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 potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. Currently, the asset allocation may not fully achieve this efficiency. By adjusting the weights of existing assets, the portfolio could improve its risk-return balance. However, this optimization focuses solely on the current assets, not diversification or other goals. Consider analyzing the Efficient Frontier to identify potential adjustments that align with your risk tolerance and investment objectives. This can enhance overall portfolio performance.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.50%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.25%

With a total dividend yield of 1.25%, the portfolio provides moderate income. The Schwab U.S. Dividend Equity ETF contributes significantly with a yield of 3.7%, while other holdings offer lower yields. Dividends can be an essential component for income-focused investors, providing a steady cash flow. Compared to benchmarks, the portfolio's yield is competitive but not high. If income generation is a priority, consider increasing allocations to high-dividend assets. This can enhance cash flow without sacrificing growth potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. Low costs mean more of your investment returns stay in your pocket, compounding over time. Compared to average mutual fund fees, this portfolio is well-positioned. Maintaining low costs is a positive alignment with best practices. Regularly reviewing fees and considering lower-cost alternatives, if available, can further optimize the portfolio's cost efficiency.

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