A balanced portfolio with strong U.S. focus and high tech sector exposure

Report created on Jan 23, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of three ETFs: 70% in Vanguard S&P 500, 20% in Vanguard Total International Stock Index Fund, and 10% in Invesco NASDAQ 100. This composition heavily leans towards U.S. equities, mainly through the S&P 500 and NASDAQ 100, which are both U.S.-centric. While this allocation provides broad diversification within large-cap equities, it lacks significant exposure to other asset classes like bonds, which could offer additional risk mitigation. To align more closely with a balanced risk profile, consider diversifying into other asset classes to reduce volatility and enhance stability.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 14.16%, outperforming many benchmarks. However, it also experienced a maximum drawdown of -26.07%, indicating potential vulnerability during market downturns. The concentration on U.S. equities, particularly tech stocks, has likely driven this performance. While past performance can provide insights, it's crucial to remember that it doesn't guarantee future results. To mitigate potential drawdowns, consider diversifying into more stable asset classes or regions, especially during periods of high market volatility.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential future outcomes, shows a promising outlook. With 1,000 simulations, the portfolio has a median projected growth of 449% and a high likelihood of positive returns, as 994 simulations ended positively. However, reliance on historical data can introduce limitations since market conditions can change. While the projections are optimistic, maintaining a diversified approach and regularly reviewing the portfolio's alignment with your risk tolerance is essential to adapt to changing market dynamics.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly allocated to stocks, with 99% of assets in equities and a negligible 1% in cash. This heavy stock allocation can lead to higher returns during bull markets but may also increase risk during downturns. Compared to a typical balanced portfolio, which might include more bonds or alternative investments, this allocation is aggressive. To balance risk and reward more effectively, consider incorporating fixed-income securities or other asset classes. This shift can potentially smooth out returns and provide a buffer during market volatility.

Sectors Info

  • Technology
    31%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio is heavily weighted towards the technology sector, comprising 31% of the total allocation. This concentration can lead to higher volatility, especially during periods of tech market corrections or interest rate changes. While tech has historically driven significant growth, it also introduces sector-specific risks. To enhance sector diversification, consider adjusting allocations to include more exposure to sectors like healthcare or industrials, which can provide stability and reduce reliance on tech-driven performance.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily concentrated in North America, with 81% exposure. This strong U.S. focus can limit diversification benefits and increase vulnerability to domestic economic shifts. In comparison, benchmarks often have a more balanced global allocation. To mitigate geographic concentration risk, consider increasing exposure to international markets, particularly in emerging regions. This strategy can provide additional growth opportunities and reduce dependency on the U.S. market's performance.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    34%
  • Mid-cap
    17%
  • Small-cap
    1%

The portfolio is well-diversified across market capitalizations, with 47% in mega-cap, 34% in big-cap, and 17% in medium-cap stocks. This spread offers a balanced risk-return profile, as larger companies tend to provide stability, while mid-cap stocks can offer growth potential. However, the minimal allocation to small and micro-cap stocks limits exposure to potentially higher growth opportunities. Consider increasing small-cap exposure to capitalize on their growth potential, while remaining mindful of the associated risks.

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's current allocation may benefit from optimization using the Efficient Frontier concept, which seeks the best risk-return ratio. By adjusting the weightings of existing assets, you can potentially achieve a more efficient balance without altering the overall asset mix. This approach focuses on maximizing returns for the given level of risk. Regularly reviewing and rebalancing the portfolio can help maintain its efficiency and ensure alignment with your risk tolerance and investment goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.56%

The portfolio's dividend yield stands at 1.56%, with the Vanguard Total International Stock Index Fund contributing the highest yield at 3.30%. Dividends can provide a stable income stream and cushion against market volatility. However, the overall yield is relatively modest, reflecting the growth-oriented nature of the portfolio. For investors seeking higher income, consider increasing allocation to dividend-focused ETFs or stocks. This shift can enhance income generation while maintaining a growth focus.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, with the Vanguard S&P 500 ETF contributing the least at 0.03%. Low costs are beneficial for long-term performance, as they reduce the drag on returns. This cost efficiency aligns well with best practices in portfolio management, ensuring more of your returns are retained. Continue monitoring expense ratios and consider cost-effective options when rebalancing or adding new investments to maintain this advantage.

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