A balanced portfolio with global exposure and a focus on technology and small-cap value

Report created on Jan 10, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio comprises four ETFs, with the Vanguard Total World Stock Index Fund ETF Shares taking the lead at 55%. The rest are evenly split among Avantis® U.S. Small Cap Value ETF, iShares Global Clean Energy ETF, and Invesco NASDAQ 100 ETF, each at 15%. This structure leans heavily towards equities, with minimal cash or other assets. Compared to a typical balanced portfolio, which might include bonds or other fixed-income assets, this portfolio is more growth-oriented. To balance potential risks, consider incorporating a small percentage of fixed-income assets to provide stability during market downturns.

Growth Info

Historically, this portfolio has achieved a Compound Annual Growth Rate (CAGR) of 10.25%, which is robust. However, it also experienced a significant maximum drawdown of -25.56%. This indicates that while the portfolio has performed well over time, it has also faced substantial losses during market downturns. The performance exceeds many standard benchmarks, but it's crucial to remember that past performance doesn't guarantee future results. To mitigate potential future drawdowns, you might explore strategies to enhance downside protection.

Projection Info

Forward projections using Monte Carlo simulations, which model potential outcomes based on historical data, suggest a median return of 177.75%. However, there's a wide range of potential outcomes, with the worst-case scenario showing a -37.59% return. While 878 out of 1,000 simulations resulted in positive returns, it's important to note that these projections are based on historical patterns and not guarantees. To prepare for uncertainty, consider regularly reviewing and adjusting your asset allocation to align with evolving market conditions and personal goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, accounting for over 99% of the total allocation. This high equity exposure suggests a strong emphasis on growth but also implies higher volatility. In contrast, a more diversified asset class allocation might include bonds or commodities to reduce risk. By introducing additional asset classes, you can enhance diversification and potentially stabilize returns. Consider gradually reallocating a portion of the portfolio into less volatile asset classes to achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    25%
  • Financials
    13%
  • Industrials
    12%
  • Utilities
    11%
  • Consumer Discretionary
    10%
  • Health Care
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    2%

Sector-wise, the portfolio is technology-heavy, with 25.4% allocated to this sector. Other significant allocations include financial services, industrials, and utilities. This concentration in technology can lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. Comparatively, the sector distribution aligns with common benchmarks but is skewed towards growth-oriented sectors. To mitigate sector-specific risks, you might consider diversifying into more defensive sectors like consumer staples or healthcare.

Regions Info

  • North America
    70%
  • Europe Developed
    13%
  • Asia Emerging
    7%
  • Japan
    4%
  • Asia Developed
    2%
  • Latin America
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with 69.6% exposure. It also includes moderate allocations to Europe and Asia. This geographic distribution provides some diversification but is under-exposed to emerging markets. While the North American focus aligns with many global benchmarks, expanding exposure to underrepresented regions could enhance diversification and capture growth opportunities in emerging markets. Consider gradually increasing allocations to regions like Latin America or Africa for a more balanced geographic spread.

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 can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the optimal portfolio suggests a higher expected return of 19.55% but with increased risk. Achieving efficiency involves reallocating existing assets to optimize returns for a given risk level. While this approach can enhance performance, it's important to balance risk tolerance and investment goals. Consider whether the potential gains justify the higher risk and adjust allocations accordingly to maintain alignment with your financial objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • iShares Global Clean Energy ETF 0.90%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Total World Stock Index Fund ETF Shares 2.00%
  • Weighted yield (per year) 1.56%

The portfolio's overall dividend yield is 1.56%, with the Vanguard Total World Stock Index Fund ETF Shares contributing the highest yield at 2%. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. Given the growth-oriented nature of the portfolio, dividends play a secondary role. If income generation is a priority, consider increasing exposure to high-dividend-paying stocks or funds to boost the portfolio's yield and provide more consistent cash flow.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Global Clean Energy ETF 0.41%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is impressively low and supports better long-term performance by minimizing costs. The Vanguard Total World Stock Index Fund ETF Shares has the lowest TER at 0.07%, contributing to cost efficiency. Low costs are beneficial as they enhance net returns. While the current expense ratio is competitive, it's always wise to periodically review and compare TERs with similar funds. This can ensure continued cost-effectiveness and potentially free up more capital for investment growth.

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