A balanced portfolio with strong US focus and significant tech exposure

Report created on Dec 21, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of three ETFs, with a heavy emphasis on the Vanguard S&P 500 ETF at 50%, Invesco QQQ Trust at 25%, and Schwab U.S. Dividend Equity ETF also at 25%. This composition leans heavily towards large-cap US equities, which are generally considered stable and reliable. However, this allocation may limit exposure to other asset types like bonds or international equities, which could enhance diversification and reduce risk.

Growth Info

Historically, the portfolio has shown a strong CAGR of 14.68%, indicating robust growth over time. However, it also experienced a significant maximum drawdown of -31.84%, highlighting vulnerability during market downturns. This suggests that while the portfolio has delivered impressive returns, it is also susceptible to periods of high volatility, which investors should be prepared for.

Projection Info

The forward projection using Monte Carlo simulations shows a promising outlook, with an annualized return of 15.96%. Monte Carlo simulations use historical data to predict potential future outcomes, but it's important to remember that past performance doesn't guarantee future results. The high number of simulations with positive returns indicates a strong probability of continued growth, though market conditions can change unpredictably.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with a negligible cash position. This heavy stock allocation supports potential growth but increases exposure to market volatility. Compared to a balanced benchmark, which might include bonds or other asset classes, this portfolio is less diversified. Introducing additional asset classes could improve risk management and provide more stability.

Sectors Info

  • Technology
    32%
  • Consumer Discretionary
    12%
  • Financials
    12%
  • Health Care
    11%
  • Telecommunications
    10%
  • Consumer Staples
    8%
  • Industrials
    7%
  • Energy
    5%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio has a significant concentration in the technology sector at nearly 32%, which could lead to higher volatility, especially during periods of tech market fluctuations. While tech stocks have driven recent market gains, this concentration may expose the portfolio to sector-specific risks. Balancing sector allocations could mitigate these risks, ensuring more stable returns across different economic cycles.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with 98.98% exposure. This focus aligns with the portfolio's US-centric strategy but limits diversification benefits from international markets. Diversifying geographically could reduce region-specific risks and capture growth opportunities in other parts of the world, such as emerging markets.

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 could potentially be optimized using the Efficient Frontier, which seeks the best risk-return balance. This involves adjusting the current asset allocation to achieve the highest expected return for a given level of risk. While the portfolio is already performing well, exploring optimization opportunities could enhance returns without significantly increasing risk.

Dividends Info

  • Invesco QQQ Trust 0.40%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 0.90%
  • Weighted yield (per year) 1.48%

The portfolio has a moderate total dividend yield of 1.48%, primarily driven by the Schwab U.S. Dividend Equity ETF. Dividends can provide a steady income stream and add to total returns, particularly in low-growth environments. Investors seeking income might consider increasing exposure to high-dividend assets, while those focused on growth may prioritize capital appreciation.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, which is beneficial for long-term performance. Lower costs mean more of the returns are retained by the investor, compounding over time. Keeping costs low is a positive aspect, and maintaining this focus will support better net returns in the long run.

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