A balanced portfolio with strong U.S. focus and moderate diversification potential

Report created on Apr 1, 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 five ETFs, with a strong emphasis on U.S. equities. The Invesco S&P 500 Equal Weight ETF and Vanguard Growth Index Fund each make up 30% of the portfolio, providing substantial exposure to large-cap U.S. stocks. The Vanguard Total Bond Market ETF accounts for 15%, offering fixed-income stability. The Vanguard Total International Stock ETF adds 15% international equity exposure, while the Invesco NASDAQ 100 ETF at 10% focuses on tech-heavy growth stocks. This composition aligns with a balanced risk profile, but the heavy U.S. focus may limit global diversification benefits.

Growth Info

The portfolio's historical performance, with a CAGR of 9.91%, indicates robust growth over the years. This rate outpaces many traditional savings vehicles, highlighting the power of equity investments. However, the maximum drawdown of -26.96% underscores the inherent volatility in equity-heavy portfolios. In comparison to benchmarks, the portfolio's performance is competitive, suggesting effective asset selection. Investors should note that past performance doesn't guarantee future results, and maintaining a diversified approach is crucial to managing potential downturns.

Projection Info

Monte Carlo simulations, which use historical data to project potential future outcomes, suggest an annualized return of 9.26%. This method provides a range of scenarios, with the 5th percentile showing a modest 4.5% return, while the median scenario projects a 193.4% increase. Although these projections offer insights, they are based on past data and assumptions that may not hold true in the future. Investors should use these projections as a guide rather than a guarantee, remaining flexible to adjust strategies as market conditions evolve.

Asset classes Info

  • Stocks
    84%
  • Bonds
    15%
  • Cash
    1%

The portfolio's asset allocation is predominantly in stocks (84%), with a smaller allocation to bonds (15%) and minimal cash (1%). This stock-heavy allocation is typical for a balanced risk profile, offering growth potential while bonds provide some stability. Compared to benchmarks, the allocation is fairly standard, but the high equity exposure may increase volatility. Investors should ensure that this allocation aligns with their risk tolerance and consider adding more bonds or alternative assets if seeking lower volatility and more income stability.

Sectors Info

  • Technology
    27%
  • Consumer Discretionary
    11%
  • Financials
    10%
  • Industrials
    8%
  • Telecommunications
    8%
  • Health Care
    7%
  • Consumer Staples
    4%
  • Real Estate
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Energy
    2%

Sector allocation reveals a significant concentration in technology (27%), followed by consumer cyclicals (11%) and financial services (10%). This tech-heavy bias can lead to higher volatility, especially during periods of interest rate hikes or tech sector downturns. While the portfolio is diversified across 11 sectors, its alignment with common benchmarks suggests a balanced approach. Investors may want to monitor sector trends and consider rebalancing if certain sectors become over or underweighted relative to their market outlook.

Regions Info

  • North America
    71%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic exposure is heavily skewed toward North America (71%), with limited exposure to other regions like Europe (6%) and Asia (4%). This North American focus may benefit from the region's economic stability but could limit potential gains from faster-growing emerging markets. Compared to global benchmarks, the portfolio is underweight in international equities. Investors seeking greater geographic diversification might consider increasing allocations to international markets to capture growth opportunities and reduce regional risk.

Market capitalization Info

  • Mega-cap
    33%
  • Mid-cap
    25%
  • Large-cap
    23%
  • Small-cap
    3%

The portfolio's market capitalization is well-distributed, with 33% in mega-cap, 25% in medium-cap, and 23% in big-cap stocks. This distribution provides exposure to both established companies and those with growth potential. However, the minimal allocation to small-cap stocks (3%) limits potential high-growth opportunities that smaller companies can offer. Investors may want to consider increasing exposure to small and micro-cap stocks to enhance diversification and capture potential high returns, while being mindful of increased volatility.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco NASDAQ 100 ETF and the Vanguard Growth Index Fund ETF Shares. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could lead to amplified losses. To enhance diversification, investors should consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio, potentially improving risk-adjusted returns and overall portfolio resilience.

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 be optimized using the Efficient Frontier, a concept that aims to achieve the best possible risk-return ratio. Currently, the portfolio's risk-return profile could be improved by reducing overlapping assets and adjusting allocations. The Efficient Frontier suggests reallocating assets to achieve a more optimal balance, potentially enhancing returns without increasing risk. However, it's important to note that optimization is based on current assets and does not guarantee future performance improvements. Investors should consider these adjustments carefully within the context of their overall investment strategy.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Invesco S&P 500® Equal Weight ETF 1.10%
  • Vanguard Growth Index Fund ETF Shares 0.40%
  • Vanguard Total International Stock Index Fund ETF Shares 2.80%
  • Weighted yield (per year) 1.47%

The portfolio's overall dividend yield is 1.47%, with the highest contribution from the Vanguard Total Bond Market ETF at 3.60%. Dividend yields can provide a steady income stream, which is particularly beneficial for income-focused investors. However, the portfolio's yield is modest, reflecting its growth-oriented focus. Investors seeking higher income may want to explore dividend-focused ETFs or stocks. Balancing growth and income is essential, and adjusting allocations to increase dividend yield should be weighed against potential impacts on capital appreciation.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Invesco NASDAQ 100 ETF 0.15%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.05%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is a low 0.10%, which is commendable and supports better long-term performance by minimizing costs. This cost efficiency aligns with best practices, as lower fees can significantly enhance net returns over time. Each ETF in the portfolio has a competitive expense ratio, contributing to the overall cost-effectiveness. Investors should continue to monitor fees and consider cost as a key factor when evaluating potential additions or replacements to the portfolio, ensuring that any changes maintain this cost advantage.

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