Balanced Portfolio with Strong US Focus and Moderate Diversification for Cautious Canadian Investors

Report created on Dec 4, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of three Vanguard ETFs, with a significant tilt towards equities, comprising 48% in US equities and 32% in global equities, excluding Canada. The remaining 20% is allocated to Canadian bonds. This mix reflects a cautious approach, balancing growth potential with stability. The portfolio's composition is moderately diversified, providing exposure to different markets and asset classes. While the equities portion offers growth opportunities, the bond allocation provides a buffer against market volatility, aligning with a risk score of 3 out of 7.

Growth Info

Historically, the portfolio has shown a solid performance with a CAGR of 11.53%. This indicates a strong growth trajectory over time, although it has experienced a maximum drawdown of -24.57%, highlighting some volatility. The portfolio's ability to generate returns in just 40 days suggests a concentrated performance period. This historical data emphasizes the importance of staying invested during market fluctuations to capture potential gains. The performance showcases the portfolio's resilience and growth potential, making it a viable option for long-term investors seeking steady returns.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation, which assesses potential outcomes by considering a range of variables, indicates an annualized return of 10.15%. The 50th percentile projection suggests a potential portfolio growth of 258.33%, while the 5th percentile shows a more conservative growth of 54.47%. This forward-looking analysis highlights the portfolio's potential to achieve substantial growth, albeit with some variability. Investors should consider these projections to understand possible future outcomes and align them with their financial goals.

Asset classes Info

  • US Equity
    68%
  • Bonds
    20%

The portfolio is primarily composed of two asset classes: equities and bonds. With 68.33% in US equities and 19.99% in Canadian bonds, the asset allocation reflects a balanced approach. This mix provides growth potential from equities while offering stability through bonds. It's crucial to maintain a diversified asset class allocation to manage risk effectively. While the current allocation aligns with a cautious risk profile, investors should continuously review their asset class exposure to ensure it remains aligned with their financial objectives and market conditions.

Sectors Info

  • Technology
    23%
  • Financials
    11%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    2%

The portfolio's sector allocation is diverse, with significant exposure to technology (22.76%), financial services (11.36%), and healthcare (8.99%). This sector diversification can help mitigate risks associated with sector-specific downturns. However, a substantial concentration in technology may increase exposure to sector volatility. To maintain a balanced risk profile, it's advisable to regularly review sector allocations and adjust if necessary. Ensuring a well-rounded sector exposure can enhance the portfolio's resilience and long-term growth potential, aligning with the investor's cautious risk tolerance.

Regions Info

  • North America
    69%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America (68.70%), with limited exposure to other regions. This concentration in North American markets can lead to regional risk, especially if economic conditions change. While the exposure to developed Europe and emerging Asia provides some diversification, it's relatively minimal. To enhance geographic diversification, consider exploring opportunities in other regions, balancing the portfolio's exposure to global markets. This approach can help manage regional risks and capture growth potential from diverse economic environments.

Redundant positions Info

  • Vanguard US Total Market
    Vanguard FTSE Global All Cap ex Canada Index ETF
    High correlation

The portfolio exhibits high correlation between the Vanguard US Total Market and the Vanguard FTSE Global All Cap ex Canada Index ETF. This correlation indicates that these assets tend to move together, which may limit diversification benefits. A highly correlated portfolio can be susceptible to market swings, reducing its ability to cushion against downturns. To improve diversification, consider adjusting the allocation to reduce overlap between correlated assets. This can help enhance the portfolio's resilience and align with a cautious investment strategy.

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.

Before optimizing the portfolio, addressing the high correlation between the Vanguard US Total Market and the Vanguard FTSE Global All Cap ex Canada Index ETF is crucial. Reducing overlap can enhance diversification and resilience. Once addressed, investors can explore the efficient frontier to adjust their risk-return balance. Moving along the frontier allows for either a riskier portfolio with higher potential returns or a more conservative one with lower volatility. This strategic approach can help align the portfolio with the investor's evolving risk appetite and financial goals.

Dividends Info

  • Vanguard Canadian Aggregate Bond 1.80%
  • Vanguard US Total Market 0.70%
  • Vanguard FTSE Global All Cap ex Canada Index ETF 1.10%
  • Weighted yield (per year) 1.05%

The portfolio's dividend yield stands at 1.05%, with contributions from the Vanguard Canadian Aggregate Bond at 1.8%, Vanguard US Total Market at 0.7%, and Vanguard FTSE Global All Cap ex Canada Index ETF at 1.1%. While dividends provide a steady income stream, the yield is modest, reflecting the portfolio's growth-oriented focus. It's essential to balance the pursuit of dividends with growth potential. Investors seeking higher income may consider increasing exposure to dividend-paying assets, while those prioritizing growth may find this yield satisfactory for their investment goals.

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