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A balanced Canadian portfolio with a strong focus on North American equities

Report created on Mar 14, 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 is comprised of a mix of equity and bond ETFs, with a significant emphasis on North American equities. The Vanguard S&P 500 Index ETF and iShares Core MSCI All Country World ex Canada Index ETF each hold a 25% weight, highlighting a strong focus on US and international markets. This allocation aligns well with a balanced investment strategy, providing exposure to both growth and stability. However, the portfolio could benefit from increased diversification beyond the current geographic and asset class focus. Consider exploring additional regions or asset types to enhance diversification further.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 12.41%. This indicates a consistent annual growth rate over time, similar to measuring a car's average speed on a road trip. However, it also experienced a maximum drawdown of -27.35%, reflecting the largest peak-to-trough decline. While past performance is promising, it's important to remember that it doesn't guarantee future results. Regularly reviewing and adjusting the portfolio to align with market conditions can help maintain robust performance.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, from a 5th percentile return of 32.8% to a 67th percentile return of 300.8%. Monte Carlo simulations use historical data to estimate future performance, but it's crucial to understand that these are not predictions. They provide a range of possibilities based on past trends. With an annualized return of 9.63%, the portfolio shows potential for growth. However, considering additional diversification could improve resilience against unexpected market shifts.

Asset classes Info

  • US Equity
    50%
  • Stocks
    25%
  • Bonds
    10%

The portfolio is heavily weighted towards equities, with 75% of assets in this class, and only 10% in bonds. This allocation provides growth potential but may expose the portfolio to higher volatility. Balancing the equity exposure with more fixed-income or alternative assets could reduce risk and enhance stability. The current bond allocation is relatively low, suggesting room for improvement in cushioning against market downturns. A more diversified asset class mix could better align with a balanced investment strategy.

Sectors Info

  • Technology
    20%
  • Financials
    19%
  • Industrials
    9%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Telecommunications
    6%
  • Energy
    6%
  • Consumer Staples
    5%
  • Basic Materials
    5%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio's sector allocation is diverse, with notable concentrations in Technology (20%) and Financial Services (19%). While these sectors have driven growth, they may also introduce volatility, especially during economic shifts or interest rate changes. Balancing exposure across sectors can mitigate risks associated with sector-specific downturns. Consider increasing allocation to underrepresented sectors like Utilities or Real Estate to enhance stability. This balanced approach could provide a more consistent performance across various market conditions.

Regions Info

  • North America
    75%
  • Europe Developed
    7%
  • Japan
    3%
  • Asia Emerging
    2%
  • Asia Developed
    1%
  • Australasia
    1%
  • Africa/Middle East
    1%

With 75% of assets in North America, the portfolio is heavily concentrated in this region. While this has been beneficial in recent years, it limits exposure to potential growth in other markets. Expanding geographic diversification to include more emerging markets or underrepresented regions could reduce reliance on North American performance. This strategy might improve resilience against regional economic downturns and capture growth opportunities in diverse global markets, aligning with a balanced investment approach.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    30%
  • Mid-cap
    14%
  • Small-cap
    3%

The portfolio's market capitalization is skewed towards larger companies, with 42% in mega-cap and 30% in big-cap stocks. This focus on established companies offers stability but may limit growth potential from smaller, innovative firms. Incorporating more small and medium-cap stocks could enhance diversification and provide exposure to companies with higher growth prospects. Balancing market capitalization exposure can help optimize risk and return, aligning with a balanced investment strategy.

Redundant positions Info

  • iShares Core MSCI All Country World ex Canada Index ETF
    Vanguard S&P 500 Index ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the iShares Core MSCI All Country World ex Canada Index ETF and the Vanguard S&P 500 Index ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. Diversifying with less correlated assets can improve risk management and enhance portfolio resilience during market downturns. Consider replacing or adjusting the weight of correlated assets to achieve better diversification and alignment with investment goals.

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.

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The portfolio could benefit from optimization using the Efficient Frontier, a concept that helps identify the best possible risk-return ratio based on current assets. By adjusting asset weights, you can achieve a more efficient portfolio. However, this optimization focuses solely on the existing asset mix and doesn't account for potential new investments. Regularly reviewing and rebalancing the portfolio to maintain optimal efficiency can enhance performance and align with investment goals.

Dividends Info

  • Vanguard Canadian Aggregate Bond 3.00%
  • Vanguard S&P 500 Index ETF 1.00%
  • iShares Core MSCI All Country World ex Canada Index ETF 0.70%
  • iShares Core Equity Portfolio 2.00%
  • iShares S&P/TSX 60 3.00%
  • BMO Aggregate Bond 1.10%
  • Weighted yield (per year) 1.63%

The portfolio has a total dividend yield of 1.63%, with contributions from various ETFs like the Vanguard Canadian Aggregate Bond (3.00%) and iShares S&P/TSX 60 (3.00%). Dividends provide a steady income stream and can enhance total returns, particularly in volatile markets. While the current yield is modest, increasing exposure to higher-yielding assets could boost income. This strategy aligns with a balanced investment approach, providing both growth and income potential.

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