A balanced portfolio with strong growth potential but limited geographic diversification

Report created on Mar 31, 2025

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 the Vanguard S&P 500 ETF making up half of the allocation, followed by the Schwab U.S. Dividend Equity ETF at 30%, and the Invesco NASDAQ 100 ETF at 20%. This structure suggests a strong focus on U.S. large-cap stocks, which is typical for a balanced risk profile. However, the lack of diversification in asset classes and regions could expose the portfolio to higher risk if the U.S. market underperforms. Consider diversifying into other asset classes, such as bonds or international equities, to reduce potential volatility and enhance risk-adjusted returns.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.10%. This indicates strong growth, especially when compared to typical market benchmarks. However, the maximum drawdown of -23.45% highlights the potential for significant losses during market downturns. While past performance is not indicative of future results, it is crucial to balance the portfolio's growth potential with risk management strategies. Consider incorporating defensive assets or increasing diversification to buffer against future market volatility.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a favorable outlook for the portfolio. With an annualized return of 14.25% and 994 out of 1,000 simulations showing positive returns, the projections are promising. However, it's important to remember that these are based on past data and may not account for future market changes. To mitigate risks, consider periodic reviews and adjustments to the portfolio to ensure it aligns with evolving market conditions and personal investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is entirely in stocks, which can limit diversification benefits. While this allocation has historically provided strong returns, it also increases exposure to market volatility. Diversifying into other asset classes, such as fixed income or real estate, could provide stability and reduce the impact of stock market fluctuations. This would align more closely with a balanced risk profile and potentially improve long-term risk-adjusted returns.

Sectors Info

  • Technology
    29%
  • Financials
    12%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Consumer Staples
    8%
  • Industrials
    8%
  • Energy
    5%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation is concentrated, with technology making up 29% of the portfolio, followed by financial services and healthcare at 12% each. This concentration in tech could lead to higher volatility, particularly during periods of interest rate hikes or regulatory changes. Diversifying across more sectors could enhance stability and reduce sector-specific risks. Consider gradually reallocating to achieve a more balanced sector distribution, which could support more consistent performance across varying market conditions.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is heavily skewed towards North America, with 99% exposure, leaving minimal diversification across other regions. This over-reliance on the U.S. market could increase vulnerability to domestic economic downturns. Expanding geographic exposure to include developed and emerging markets could enhance diversification and potentially capture growth opportunities in other regions. This adjustment would align with a balanced investment strategy and help mitigate geographic concentration risks.

Market capitalization Info

  • Large-cap
    44%
  • Mega-cap
    34%
  • Mid-cap
    19%
  • Small-cap
    2%

The portfolio is weighted towards large-cap stocks, with 44% in big and 34% in mega-cap companies. While these companies are typically stable and less volatile, the lack of exposure to small and mid-cap stocks could limit growth potential. Adding more mid and small-cap stocks could enhance diversification and provide opportunities for higher returns, albeit with increased risk. This balanced approach could better align with a growth-oriented investment strategy while managing overall risk.

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 risk-return profile can be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio for a given set of assets. While the current allocation focuses on growth, adjusting the asset weights could enhance efficiency. This might involve reducing exposure to highly correlated assets or increasing diversification across sectors and geographies. Such optimization could improve the portfolio's risk-adjusted returns without necessarily increasing overall risk.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.88%

The portfolio's dividend yield stands at 1.88%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield of 3.70%. While dividends provide a steady income stream, the overall yield is relatively moderate. For income-focused investors, increasing allocation to higher-yielding assets might be beneficial. However, it's essential to balance the pursuit of yield with the need for growth and diversification. Consider reviewing dividend strategies periodically to ensure they align with your income and growth objectives.

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%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, which is beneficial for long-term performance as lower costs mean more of the returns stay in your pocket. This cost efficiency aligns well with best investment practices, allowing for greater compounding of returns over time. Maintaining this cost structure is advantageous, but it's also worth periodically reviewing the expense ratios of your holdings to ensure continued cost-effectiveness as the market evolves.

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