Balanced portfolio with high US equity focus and low diversification

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily weighted towards US equities, with 50% in the Vanguard S&P 500 ETF and 30% in the Invesco NASDAQ 100 ETF. This composition suggests a strong focus on large-cap US stocks, providing exposure to established companies. The iShares 0-3 Month Treasury Bond ETF, comprising 20% of the portfolio, adds a level of safety and liquidity. Compared to a typical balanced portfolio, which might include a broader mix of asset classes like international equities and bonds, this portfolio is more concentrated. Consider diversifying further to mitigate risks associated with economic downturns in the US.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.12%. This impressive return is likely driven by the strong performance of US equities over the past decade. However, the max drawdown of -23.78% indicates significant volatility during downturns. It's crucial to remember that past performance does not guarantee future results. While the historical returns are strong, consider how comfortable you are with potential volatility and whether the portfolio aligns with your long-term goals.

Projection Info

Monte Carlo simulations, which use historical data to model future outcomes, project an annualized return of 12.22%. With 991 out of 1,000 simulations showing positive returns, the outlook appears optimistic. However, the 5th percentile projection of 62.2% highlights potential risks. Monte Carlo simulations are not foolproof; they rely on historical data and assumptions, which may not hold in the future. It's wise to use these projections as one of many tools in your decision-making process, rather than as a definitive forecast.

Asset classes Info

  • Stocks
    80%
  • Cash
    20%

The portfolio's allocation is primarily in stocks (79.94%) and cash (20.06%), which may limit diversification benefits. While the equity component offers growth potential, the lack of fixed-income securities could expose the portfolio to higher volatility. A more diversified portfolio might include bonds or alternative investments, which can provide stability and reduce overall risk. Consider adjusting the asset class allocation to better balance risk and return, especially if market conditions change.

Sectors Info

  • Technology
    32%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Financials
    7%
  • Health Care
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

The sector allocation shows a significant concentration in technology (31.58%), followed by consumer cyclicals and communication services. This tech-heavy focus can lead to higher volatility, especially during periods of interest rate changes or tech sector downturns. Compared to benchmark indices, this portfolio may be overexposed to tech. Diversifying into other sectors like healthcare or utilities could provide more stability and reduce sector-specific risks. Regularly review sector allocations to ensure they align with your risk tolerance and market outlook.

Regions Info

  • North America
    79%
  • Europe Developed
    1%

With 79.04% exposure to North America, the portfolio is heavily concentrated in the US market. This geographic focus can limit diversification and increase vulnerability to US economic fluctuations. While the US market has been strong, global diversification can provide exposure to growth opportunities in other regions and reduce country-specific risks. Consider increasing allocations to developed and emerging markets outside North America to achieve a more balanced geographic exposure and potentially enhance returns.

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 asset allocation can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. This involves adjusting the weights of existing assets to achieve a more efficient portfolio. While the current allocation may already be close to optimal, exploring potential adjustments could further enhance performance. Keep in mind that optimization focuses on risk and return, not diversification. Regularly reassessing your portfolio can ensure it remains aligned with your evolving investment objectives.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • iShares® 0-3 Month Treasury Bond ETF 5.10%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.80%

The portfolio's dividend yield stands at 1.8%, with the iShares 0-3 Month Treasury Bond ETF contributing significantly with a 5.1% yield. While dividends provide a steady income stream, the overall yield is relatively low compared to income-focused portfolios. If generating income is a priority, consider increasing exposure to higher-yielding assets. However, ensure that any adjustments align with your risk tolerance and investment goals. Balancing growth and income is key to maintaining a well-rounded portfolio.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.07%. This is beneficial for long-term performance, as lower fees mean more of your returns stay invested. The Vanguard S&P 500 ETF, with a TER of 0.03%, is particularly cost-effective. While the current costs are favorable, it's important to periodically review them to ensure they remain competitive. Consider exploring other low-cost options if any existing assets become more expensive over time.

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