A balanced portfolio with strong US focus and notable tech sector concentration

Report created on Jan 30, 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 is comprised of six ETFs, with a significant focus on US equities. The Invesco NASDAQ 100 ETF and Vanguard S&P 500 ETF each hold 25%, indicating a strong tilt towards large-cap US stocks. This composition suggests a focus on growth and stability. Compared to typical balanced portfolios, this one is heavily weighted towards US equities, which may limit exposure to international markets. To enhance diversification, consider increasing allocations to international ETFs or adding bonds. This can help balance the risk and provide exposure to different economic cycles.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.87%. This impressive growth rate indicates strong past performance, especially given the portfolio's focus on large-cap US equities. However, the maximum drawdown of -17.78% highlights the potential for significant losses during market downturns. While past performance is not indicative of future results, understanding these trends can help set realistic expectations. To mitigate potential drawdowns, consider diversifying further into less correlated asset classes or regions, which can provide a buffer during volatile periods.

Projection Info

Using a Monte Carlo simulation, which analyzes potential future outcomes based on historical data, the portfolio shows promising projections. With a median (50th percentile) outcome of 554% growth and a high probability of positive returns, the outlook is optimistic. However, it's important to note that simulations are based on historical data and cannot predict future events. To enhance future performance, consider regularly reviewing and adjusting the portfolio in response to market changes. This proactive approach can help maintain alignment with your financial goals and risk tolerance.

Asset classes Info

  • Stocks
    97%
  • No data
    2%

The portfolio is heavily skewed towards stocks, with 97% allocation, indicating a high-risk, high-reward strategy. This concentration suggests a focus on capital appreciation rather than income generation or capital preservation. Compared to balanced benchmarks, this allocation may be riskier due to limited exposure to fixed-income assets. To align more closely with a balanced risk profile, consider introducing bonds or other fixed-income assets. This can provide stability and reduce volatility, especially during market downturns, offering a more diversified approach to risk management.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Health Care
    9%
  • Financials
    8%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Basic Materials
    2%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation is notably concentrated in technology, comprising 39% of the portfolio. This suggests a strong belief in the growth potential of tech stocks, which have historically driven significant returns. However, this concentration also poses a risk, as tech stocks can be volatile, especially during economic shifts or interest rate changes. To mitigate sector-specific risks, consider rebalancing to include more defensive sectors like utilities or consumer staples. This can help cushion the portfolio against tech sector downturns and provide more consistent returns.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    6%
  • Japan
    4%

With 81% of the portfolio allocated to North American assets, there is a strong regional concentration. This focus on the US market aligns with the portfolio's emphasis on large-cap growth but limits exposure to international opportunities. Compared to global benchmarks, this allocation may lack diversification across regions. To enhance geographic diversification, consider increasing exposure to emerging markets or developed regions outside of North America. This can provide access to different growth drivers and reduce reliance on the US economy, potentially improving risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    54%
  • Large-cap
    31%
  • Mid-cap
    11%

The portfolio leans heavily towards mega-cap stocks, with 54% allocation, followed by big-cap stocks at 31%. This suggests a preference for established companies with stable earnings and market dominance. While mega-cap stocks can offer stability, they may also limit growth potential compared to smaller companies. To capture growth opportunities, consider increasing exposure to mid-cap or small-cap stocks. These companies often have higher growth potential and can enhance diversification, providing a balance between stability and growth within the portfolio.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Invesco NASDAQ 100 ETF
    JPMorgan Nasdaq Equity Premium Income ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio exhibits high correlation among its US-focused ETFs, particularly between the Vanguard S&P 500 ETF, Invesco NASDAQ 100 ETF, and others. This correlation indicates that these assets tend to move in the same direction, which can limit diversification benefits. During market downturns, highly correlated assets may exacerbate losses. To improve diversification, consider adding assets with lower correlation, such as international equities or bonds. This can help reduce overall portfolio risk and provide more balanced returns across different market conditions.

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.

To optimize the portfolio using the Efficient Frontier, focus on adjusting the current asset allocation for the best possible risk-return ratio. The Efficient Frontier is a concept that helps identify the optimal balance between risk and return based solely on your existing assets. However, before optimizing, consider removing highly correlated assets that may not contribute to diversification. This can help achieve a more efficient portfolio by reallocating to assets that provide better diversification benefits, ultimately improving the overall risk-return profile.

Dividends Info

  • iShares MSCI India ETF 0.80%
  • JPMorgan Nasdaq Equity Premium Income ETF 9.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard International Dividend Appreciation Index Fund ETF Shares 1.90%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 2.26%

The portfolio's dividend yield stands at 2.26%, primarily driven by the JPMorgan Nasdaq Equity Premium Income ETF's high yield of 9.50%. This suggests a focus on income generation, alongside growth, which can provide a steady cash flow. However, the reliance on a single ETF for dividend income may pose a risk if the ETF's performance declines. To enhance income stability, consider diversifying across multiple dividend-paying assets. This approach can provide a more consistent income stream and reduce reliance on any single ETF for dividends.

Ongoing product costs Info

  • iShares MSCI India ETF 0.65%
  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard International Dividend Appreciation Index Fund ETF Shares 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.16%

With a Total Expense Ratio (TER) of 0.16%, the portfolio's costs are impressively low. This efficient cost structure supports better long-term performance by minimizing the drag on returns. Compared to industry averages, these costs are competitive, allowing more of the portfolio's gains to compound over time. Maintaining low costs is crucial for maximizing net returns. Regularly review the expense ratios of your holdings to ensure they remain competitive. Consider replacing higher-cost funds with lower-cost alternatives to further enhance cost efficiency.

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