A stock-heavy portfolio with moderate diversification and a focus on US equities

Report created on Jan 9, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with a 94.6% allocation to stocks and only 5% in bonds. Such a composition leans towards growth, which is typical for investors seeking higher returns. Compared to a balanced benchmark, this equity concentration is on the higher side, which might increase volatility. While stocks offer growth potential, bonds provide stability, so consider increasing the bond allocation for more balance. A more diversified portfolio could help mitigate risk during market downturns.

Growth Info

Historically, the portfolio has delivered an impressive CAGR of 12.33%, indicating strong growth over time. However, it also experienced a significant max drawdown of -33.78%, highlighting the potential for substantial losses during market downturns. This performance is typical for stock-heavy portfolios, which tend to be more volatile. While past performance is not a guarantee of future results, the historical returns suggest this portfolio has been effective in capturing market gains. Regularly reviewing performance and adjusting as needed can help maintain alignment with your goals.

Projection Info

The Monte Carlo analysis provides a range of potential outcomes, using historical data to simulate future returns. With a median (50th percentile) projection of 133.44% and an annualized return of 7.36%, the portfolio shows promising potential. However, the 5th percentile projection of -1.01% underscores the inherent risk. While simulations offer insights, they are based on past data and assumptions, which may not fully predict future conditions. Regularly revisiting projections and considering potential market changes can help refine expectations and strategies.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio's asset class allocation is heavily skewed towards stocks, with a minimal bond presence. This allocation may benefit from the growth potential of equities but lacks the cushioning effect bonds provide during market volatility. Compared to a typical balanced portfolio, which might have a more even split, this one leans towards higher risk. To improve diversification and risk management, consider gradually increasing bond exposure. This adjustment could help stabilize returns and reduce the impact of market fluctuations.

Sectors Info

  • Technology
    27%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Basic Materials
    3%
  • Utilities
    3%

With 27.47% in technology, this portfolio has a significant sector concentration, which could lead to higher volatility, especially during tech downturns. The remaining sector allocations, such as financial services and healthcare, provide some diversity but are overshadowed by the tech focus. A more balanced sector distribution could reduce risk. Regularly reviewing sector performance and trends can help identify opportunities for rebalancing. Consider diversifying into underrepresented sectors to enhance stability and potential returns.

Regions Info

  • North America
    85%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

The portfolio's geographic exposure is predominantly in North America, accounting for 85.4% of the allocation. While this focus aligns with the client's US region, it limits exposure to global growth opportunities. Compared to global benchmarks, this geographic concentration might miss out on diversification benefits. Expanding exposure to international markets could enhance growth potential and reduce region-specific risks. Consider gradually increasing allocations to regions like Europe and Asia to capture a broader range of opportunities.

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 allocation might not be fully optimized for risk versus return, considering its high equity concentration. Using the Efficient Frontier concept, which identifies the best possible risk-return ratio, adjustments could enhance performance. By reallocating between existing assets, the portfolio could achieve better efficiency without needing to diversify further. Regularly reviewing and rebalancing to maintain alignment with the Efficient Frontier can help optimize returns. This approach ensures the portfolio continues to meet your risk tolerance and investment goals.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.63%

The overall portfolio dividend yield is 1.63%, with contributions from both stock and bond ETFs. Dividends provide a steady income stream, which can be particularly beneficial during periods of market volatility. The bond ETF offers a higher yield at 3.7%, enhancing income stability. While dividends contribute to total returns, they may not significantly impact growth-focused portfolios. Regularly reviewing dividend yields and reinvesting them can help boost long-term growth. Consider balancing yield with growth to align with your income needs.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of just 0.04%. These low fees are advantageous for long-term performance, as high costs can erode returns over time. This cost efficiency aligns well with best practices in portfolio management. Maintaining low costs should remain a priority, as it supports better net returns. Regularly reviewing fund expenses and exploring cost-effective options can help sustain this advantage. Staying vigilant about fees ensures more of your investment returns stay in your pocket.

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