A growth-focused Canadian portfolio with significant US equity exposure and moderate diversification

Report created on Jan 11, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards US equities, with the Vanguard S&P 500 Index ETF making up 44.4% of the total. The iShares Core Equity Portfolio and iShares NASDAQ 100 (CAD Hedged) each contribute 27.8%. This composition leans heavily towards large-cap US stocks, which is common for growth-focused portfolios. While this allocation is beneficial for capturing market growth, it lacks diversification across other asset classes like bonds or international equities, which could help manage risk during market downturns.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 17.31%, indicating robust past performance. However, it also experienced a maximum drawdown of -28.47%, reflecting its vulnerability during market declines. This level of volatility is typical for growth-oriented portfolios, which prioritize returns over stability. Comparing this to a benchmark like the S&P 500, the portfolio's performance aligns closely, showing its effectiveness in capturing market gains. It's important to remember that past performance is not a guarantee of future results.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, from a 5th percentile of 147.25% to a 67th percentile of 1,164.29%. Monte Carlo simulations use historical data to model thousands of potential future scenarios, helping investors understand the range of possible returns. The high number of simulations with positive returns (996 out of 1,000) indicates a strong likelihood of positive outcomes, but it's crucial to remember that these projections are based on historical data and assumptions, which may not hold in the future.

Asset classes Info

  • US Equity
    84%
  • Stocks
    7%

The portfolio's asset allocation is heavily skewed towards equities, particularly US equities, which make up 84.5% of the total. This concentration in equities is typical for growth portfolios, aiming to maximize returns through stock market appreciation. However, this lack of diversification across asset classes can increase risk, particularly during periods of market volatility. Diversifying into other asset classes, such as bonds or international stocks, could provide a buffer against equity market downturns.

Sectors Info

  • Technology
    35%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Health Care
    8%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio has a significant concentration in the technology sector, accounting for 35.1% of the total allocation. This focus on tech stocks can drive growth, especially in a tech-driven market. However, it also exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. Compared to common benchmarks, the heavy tech allocation may lead to higher volatility. Balancing this with exposure to other sectors could reduce risk and enhance stability.

Regions Info

  • North America
    91%
  • Europe Developed
    5%
  • Japan
    2%
  • Asia Emerging
    1%
  • Asia Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 91.5% of assets allocated there. This heavy regional focus can limit exposure to growth opportunities in other parts of the world. While North American markets offer stability and growth potential, diversifying into emerging markets or other developed regions could enhance returns and reduce regional risk. This geographic concentration might miss out on global diversification benefits.

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 potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. This optimization focuses on reallocating current holdings to achieve a more efficient balance. While the portfolio is growth-oriented, exploring adjustments to enhance the risk-return profile could be beneficial. It's important to note that efficiency does not necessarily mean increased diversification but rather improved performance relative to risk.

Dividends Info

  • Vanguard S&P 500 Index ETF 0.50%
  • iShares Core Equity Portfolio 0.90%
  • iShares NASDAQ 100 (CAD Hedged) 0.20%
  • Weighted yield (per year) 0.53%

The overall dividend yield of the portfolio is modest at 0.53%, reflecting its growth orientation. Dividends can provide a steady income stream and help cushion against market volatility. However, for growth-focused portfolios, capital appreciation is typically prioritized over income generation. Investors seeking higher income might consider reallocating towards higher-yielding assets. Nonetheless, the current yield aligns with the portfolio's growth objectives.

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