A balanced portfolio with strong growth potential and moderate geographic diversification

Report created on Jan 3, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is primarily composed of equity ETFs, with a notable concentration in large-cap U.S. stocks. The Vanguard S&P 500 ETF holds the largest share at 30%, followed by the Vanguard Total Stock Market Index Fund ETF and Invesco QQQ Trust. The allocation leans towards growth-oriented investments, reflecting a focus on capital appreciation. Compared to typical balanced portfolios, this one is more equity-heavy, which might increase volatility but could also enhance returns. To align with a balanced risk profile, consider introducing more asset classes, like bonds or real estate, for increased diversification and stability.

Growth Info

Historically, the portfolio has performed impressively, achieving a Compound Annual Growth Rate (CAGR) of 14.22%. This is significantly higher than the average market returns, indicating strong capital growth. However, the maximum drawdown of -32.57% suggests vulnerability during market downturns. While past performance provides a useful benchmark, it's important to remember that it doesn't guarantee future success. To mitigate potential losses, consider strategies that balance growth with risk management, such as diversifying into less volatile assets.

Projection Info

Forward projections using Monte Carlo simulations suggest robust potential outcomes, with a median growth of 473.25% over the long term. Monte Carlo analysis uses historical data to simulate various future scenarios, highlighting potential returns and risks. While promising, it's crucial to recognize that these projections are based on past data and assumptions, which may not fully predict future market conditions. To enhance forecast accuracy, regularly update simulations with current data and adjust strategies as needed.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, accounting for over 99% of the total allocation. This heavy reliance on a single asset class limits diversification benefits and exposes the portfolio to higher market risk. Compared to balanced benchmarks, which typically include bonds and other assets, this portfolio could benefit from incorporating additional asset classes. Introducing fixed income or alternative investments could help stabilize returns and reduce volatility, aligning more closely with a balanced investment strategy.

Sectors Info

  • Technology
    32%
  • Financials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation reveals a significant tilt towards technology, making up over 31% of the portfolio. This concentration suggests potential for high growth but also increased volatility, especially during economic shifts affecting tech industries. Other sectors like financial services and consumer cyclicals provide some balance, yet remain underrepresented compared to technology. To enhance sector diversification, consider reallocating towards more defensive sectors, such as utilities or consumer staples, which can offer stability during market fluctuations.

Regions Info

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

Geographically, the portfolio is heavily weighted towards North America, with over 90% exposure. This focus may limit diversification and increase vulnerability to regional economic downturns. Compared to global benchmarks, which typically have more balanced geographic allocations, this portfolio could benefit from greater international exposure. Expanding investments in emerging markets or other developed regions could enhance diversification and capture growth opportunities outside North America, aligning with a more globally diversified strategy.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    Invesco QQQ Trust
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation among several key assets, such as the Vanguard S&P 500 ETF and Invesco QQQ Trust. High correlation means these assets tend to move together, potentially limiting diversification benefits. During market downturns, this could lead to synchronized losses across the portfolio. To improve risk management, consider reducing exposure to highly correlated assets and introducing less correlated ones. This approach can enhance diversification and resilience against market 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.

While the portfolio is well-constructed, there's potential for optimization using the Efficient Frontier. This method identifies the best possible risk-return balance based on current assets. However, the presence of highly correlated assets may limit diversification benefits. Before optimizing, consider reducing overlap by replacing correlated ETFs with distinct alternatives. This can improve efficiency by enhancing diversification, ultimately leading to a more balanced risk-return profile.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.64%

The portfolio's overall dividend yield is 1.64%, with the Schwab U.S. Dividend Equity ETF contributing a significant 3.6%. Dividends provide a steady income stream, which can be particularly valuable during periods of market volatility. However, the focus on growth-oriented ETFs may limit the overall yield. For investors seeking higher income, consider increasing allocations to dividend-focused assets. This can complement growth objectives while providing a buffer against market fluctuations through regular income.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • 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 a low 0.07%, indicating cost efficiency. Low costs are crucial for maximizing long-term returns, as high fees can significantly erode gains over time. The inclusion of low-cost ETFs like the Vanguard S&P 500 ETF contributes to this efficiency. To maintain or enhance this advantage, regularly review and compare fund fees. Consider swapping higher-cost funds for more affordable alternatives without compromising on performance or diversification.

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