Balanced and Broadly Diversified Portfolio with Strong International Exposure and Moderate Risk
Report created on Jul 28, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 70.00% -
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 23.00% -
SO Invesco PHLX Semiconductor ETF
SOXQ - US46138G6153 7.00%
The portfolio is composed of three ETFs, with the Vanguard Total International Stock Index Fund dominating at 70%. The Invesco NASDAQ 100 ETF makes up 23%, while the Invesco PHLX Semiconductor ETF accounts for the remaining 7%. This composition indicates a strong emphasis on international diversification, with a focus on technology and growth sectors. The portfolio is balanced, offering a mix of stability and growth potential. This balance is suitable for investors seeking moderate risk exposure while benefiting from global market opportunities.
Growth
Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 5.78%, which is decent for a balanced portfolio. However, it experienced a significant maximum drawdown of -31.3%, indicating vulnerability during market downturns. As only five days account for 90% of the returns, this highlights the importance of market timing. Investors should be aware of the potential volatility and prepare for fluctuations. Over the long term, maintaining a balanced approach can help mitigate these risks while still achieving reasonable returns.
Projection
Using a Monte-Carlo simulation with 1,000 simulations, the portfolio shows an annualized return of 12.91%. This simulation predicts a wide range of outcomes, with the 5th percentile at -25.2% and the 67th percentile at 452.04%. Monte-Carlo simulations use random sampling to model potential future performance, helping to understand possible risks and returns. While the median projection is promising, investors should remain cautious and consider their risk tolerance. Diversifying further or adjusting asset allocation could enhance the probability of achieving desired outcomes.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is heavily weighted towards stocks, comprising 98.93% of the total allocation. This high concentration in equities suggests a focus on capital appreciation, but also introduces volatility. With minimal exposure to cash and other asset classes, there is limited protection against market downturns. Investors might consider incorporating more fixed-income securities or other asset classes to balance risk and return. A more diversified asset class distribution could provide stability and reduce the impact of market fluctuations.
Sectors
- Technology 28%
- Financials 15%
- Industrials 11%
- Consumer Discretionary 11%
- Health Care 8%
- Telecommunications 8%
- Consumer Staples 6%
- Basic Materials 6%
- Energy 4%
- Utilities 3%
- Real Estate 2%
The sector allocation is led by technology at 27.84%, followed by financial services and industrials. This concentration in technology indicates a growth-oriented strategy, potentially benefiting from innovation and tech advancements. However, it also exposes the portfolio to sector-specific risks. A balanced sector allocation could help mitigate these risks, ensuring stability across different economic cycles. Investors may want to evaluate their sector exposure and consider rebalancing to achieve a more even distribution across various industries.
Regions
- North America 34%
- Europe Developed 28%
- Asia Emerging 12%
- Japan 11%
- Asia Developed 8%
- Australasia 4%
- Africa/Middle East 2%
- Latin America 2%
Geographically, the portfolio is well-diversified, with significant exposure to North America and Europe Developed. Emerging markets like Asia and Latin America are also represented, albeit to a lesser extent. This geographic diversification helps spread risk across different regions, reducing the impact of localized economic downturns. However, the portfolio may benefit from increased exposure to underrepresented regions to capture potential growth opportunities. Investors should regularly review geographic allocations and adjust as needed to maintain a balanced global perspective.
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 is currently near the efficient frontier, indicating a balance between risk and return. The efficient frontier represents the optimal portfolios that offer the highest expected return for a given level of risk. While the current allocation is efficient, it may not be the optimal one. Investors could explore different risk levels to better align with their preferences. Adjusting asset allocation and exploring diversification opportunities can help achieve a more optimal portfolio, maximizing returns while managing risk effectively.
Dividends
- Invesco NASDAQ 100 ETF 0.60%
- Invesco PHLX Semiconductor ETF 0.70%
- Vanguard Total International Stock Index Fund ETF Shares 3.00%
- Weighted yield (per year) 2.29%
The portfolio offers a total dividend yield of 2.29%, with the Vanguard Total International Stock Index Fund providing the highest yield at 3.0%. This yield is a valuable source of passive income, especially for long-term investors. While dividends can enhance total returns, the focus on growth-oriented ETFs means the yield is moderate. Investors seeking higher income may consider increasing exposure to dividend-focused assets. Balancing growth and income can help achieve both capital appreciation and a steady income stream.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Invesco PHLX Semiconductor ETF 0.19%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.10%
The portfolio's total expense ratio (TER) is 0.1%, which is relatively low and cost-effective for investors. Low costs are crucial for maximizing net returns, as high fees can erode gains over time. The Vanguard Total International Stock Index Fund has the lowest expense ratio, contributing to the portfolio's overall cost efficiency. Investors should continue to prioritize low-cost investments to optimize returns. Regularly reviewing and comparing expense ratios across holdings can help maintain a cost-effective portfolio strategy.
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