A balanced portfolio with strong North American focus and significant tech sector exposure

Report created on Mar 28, 2025

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 primarily composed of ETFs, with a notable allocation to Vanguard Total Stock Market Index Fund ETF Shares at 32.5%. This is complemented by global exposure via Vanguard Total World Stock Index Fund ETF Shares at 30%. The portfolio also includes a mix of common stocks and specialized ETFs. This structure aligns well with a balanced investment approach, providing broad market exposure. However, the portfolio's heavy reliance on a few large ETFs may limit diversification benefits. Rebalancing to include more varied asset types could enhance risk management and return potential.

Growth Info

Historically, the portfolio has shown strong performance with a Compound Annual Growth Rate (CAGR) of 13.39%. This indicates robust growth over time, outperforming many market benchmarks. However, the portfolio experienced a maximum drawdown of -24.80%, highlighting potential volatility. This underscores the importance of maintaining a diversified approach to mitigate risks during market downturns. To optimize performance, consider strategies that balance growth with risk management, such as adjusting asset allocations or incorporating more defensive positions.

Projection Info

The Monte Carlo simulation, a statistical method used to predict future outcomes based on historical data, indicates a wide range of potential returns for this portfolio. It projects a 5th percentile outcome of 222.9% and a 50th percentile of 1,349.7%, suggesting a generally optimistic outlook. However, it's crucial to remember that these projections are based on historical data and may not account for future market changes. Regularly reviewing and adjusting the portfolio in response to economic shifts can help align with desired financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly allocated to stocks (99%), with a minimal cash position. This heavy stock allocation suggests an aggressive growth strategy, potentially leading to higher returns but also increased volatility. While stocks offer substantial growth potential, incorporating other asset classes like bonds could provide stability and reduce overall risk. Balancing stock exposure with fixed income or alternative investments might enhance diversification and improve resilience during market fluctuations.

Sectors Info

  • Technology
    25%
  • Financials
    21%
  • Industrials
    14%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio has significant exposure to the technology sector at 25%, followed by financial services at 21% and industrials at 14%. This sector allocation reflects a growth-oriented strategy, capitalizing on tech innovation and economic expansion. However, a tech-heavy portfolio may face heightened volatility, especially during interest rate hikes or regulatory changes. Diversifying into sectors with lower correlation to technology, such as consumer staples or utilities, could mitigate risk and enhance stability.

Regions Info

  • North America
    75%
  • Europe Developed
    11%
  • Japan
    4%
  • Asia Emerging
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

With 75% of assets in North America, the portfolio is heavily weighted towards this region. While this aligns with the client's U.S. base, it may limit exposure to growth opportunities in other regions. Europe and Asia are underrepresented, which could affect diversification. Expanding geographic exposure, particularly in emerging markets, can capture growth potential and reduce reliance on North American performance. This broader diversification can help mitigate region-specific risks.

Market capitalization Info

  • Mega-cap
    45%
  • Large-cap
    33%
  • Mid-cap
    16%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio is well-diversified across market capitalizations, with 45% in mega-cap, 33% in big-cap, and the remainder in medium to micro-cap stocks. This distribution supports a balanced approach, providing stability from larger companies while capturing growth potential from smaller ones. However, the small and micro-cap segments are relatively modest, possibly limiting upside potential. Increasing exposure to these smaller market caps could enhance growth prospects, albeit with increased volatility.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, notably the Vanguard Total Stock Market and Vanguard Total World Stock ETFs. High correlation means these assets tend to move together, reducing diversification benefits. In market downturns, such overlap can amplify losses. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio. This adjustment could enhance risk management without sacrificing return potential.

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 current portfolio could be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio. By adjusting asset allocations, the portfolio could achieve a higher expected return while maintaining the same risk level. However, this optimization requires careful consideration of asset correlations and market conditions. While efficiency focuses on maximizing returns for a given risk, it doesn't inherently address diversification needs. Balancing these factors is key to achieving an optimal portfolio.

Dividends Info

  • Howmet Aerospace Inc 0.20%
  • Northrop Grumman Corporation 1.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Defiance Quantum 0.50%
  • Raytheon Technologies Corp 1.90%
  • Transdigm Group Incorporated 5.40%
  • Textron Inc 0.10%
  • Vanguard Total World Stock Index Fund ETF Shares 1.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.00%
  • Vanguard Total International Stock Index Fund ETF Shares 2.80%
  • Weighted yield (per year) 1.37%

The portfolio's dividend yield stands at 1.37%, providing a modest income stream. Dividends can offer a cushion during market volatility and contribute to total returns. However, the focus on growth-oriented stocks may limit dividend income. Investors seeking higher income might consider reallocating towards dividend-focused stocks or ETFs. Balancing growth with income-generating assets can enhance overall portfolio stability and cater to income-oriented goals.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Defiance Quantum 0.40%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.05%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, which is beneficial for long-term returns. Lower costs mean more of the portfolio's growth is retained, compounding over time. This cost efficiency aligns well with passive investment strategies focused on broad market exposure. Maintaining this low-cost structure is advantageous, but it's crucial to ensure that cost-cutting doesn't compromise diversification or risk management. Regularly reviewing expense ratios can help sustain cost-effectiveness.

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