A balanced portfolio with a strong focus on US equities and moderate international exposure

Report created on Dec 7, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of US-focused ETFs, with a 50% allocation to the Vanguard S&P 500 ETF and a 20% allocation to the Invesco NASDAQ 100 ETF. This indicates a strong emphasis on large-cap and tech-heavy US equities. Complementing this, there is a 15% allocation to the Avantis U.S. Small Cap Value ETF, providing exposure to smaller, potentially high-growth domestic companies. The remaining 15% is invested in the Vanguard Total International Stock Index Fund ETF, offering global diversification. This composition suggests a balanced approach, with a significant tilt towards US markets, which can provide stability and growth potential but might also introduce concentration risk.

Growth Info

Historically, the portfolio has delivered an impressive compound annual growth rate (CAGR) of 16.19%, indicating strong past performance. This high growth rate reflects the robust performance of US equities, particularly tech stocks, over recent years. However, it's essential to remember that past performance does not guarantee future results. The maximum drawdown of -25.09% highlights potential volatility, which investors should be prepared for. To mitigate such risks, maintaining a diversified portfolio and regularly reviewing asset allocation can be beneficial, ensuring alignment with one's risk tolerance and investment goals.

Projection Info

Forward projections using Monte Carlo simulations, which model potential future outcomes based on historical data, suggest a promising outlook. The median (50th percentile) projection indicates a potential portfolio increase of 663.62%. However, it's crucial to note that simulations are based on past data and assumptions, which may not hold in the future. A 5th percentile projection shows a more conservative increase of 118.62%, highlighting the importance of preparing for various scenarios. Regularly revisiting investment strategies and adjusting allocations based on changing market conditions can help optimize future performance.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.71% allocated to equities, suggesting a high exposure to market volatility. While this can lead to substantial growth, it also introduces greater risk, particularly during market downturns. The minimal allocation to cash and other asset classes indicates limited liquidity and defensive positioning. To enhance diversification and potentially reduce risk, consider incorporating other asset classes such as bonds or real estate, which can provide stability and income during volatile periods, balancing the high equity exposure.

Sectors Info

  • Technology
    30%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Industrials
    10%
  • Telecommunications
    9%
  • Health Care
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is heavily concentrated in technology, which constitutes 29.62% of the allocation. This reflects the significant investment in the NASDAQ 100 ETF. While tech has been a strong performer, this concentration poses a risk if the sector faces downturns. The portfolio also has notable allocations in financial services, consumer cyclicals, and industrials. To mitigate sector-specific risks, consider diversifying into underrepresented sectors like utilities or real estate, which can offer defensive characteristics and reduce overall portfolio volatility.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly concentrated in North America, accounting for 85.07% of the allocation. This heavy US focus may limit exposure to growth opportunities in other regions. While the Vanguard Total International Stock Index Fund provides some diversification, its 15% allocation may not be sufficient to capture the full benefits of global market exposure. To enhance geographic diversification, consider increasing allocations to emerging markets or developed regions outside of North America, which can offer growth potential and reduce reliance on the US market.

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 seeks to achieve the best possible risk-return ratio with the current assets. By adjusting the allocation between existing ETFs, it's possible to enhance efficiency without adding new investments. This involves finding the optimal balance where expected returns are maximized for a given level of risk. Regularly revisiting the portfolio's allocation in light of changing market conditions and personal risk tolerance can ensure it remains aligned with financial objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.38%

The portfolio's dividend yield stands at 1.38%, with the Vanguard Total International Stock Index Fund contributing the highest yield at 2.9%. While dividends provide a steady income stream, the overall yield is relatively modest, reflecting the portfolio's growth-oriented nature. For investors seeking higher income, consider reallocating a portion of the portfolio to dividend-focused investments. Balancing growth with income-generating assets can enhance total returns and provide a cushion during market volatility, aligning with long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is relatively low, reflecting the cost-effectiveness of the chosen ETFs. Lower costs can significantly enhance long-term returns by minimizing the drag on performance. The Vanguard S&P 500 ETF, with a TER of 0.03%, is particularly cost-efficient. While the Avantis U.S. Small Cap Value ETF has a higher TER of 0.25%, its potential for higher returns may justify the cost. Regularly reviewing and optimizing for lower-cost options can help improve net returns over time.

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