A balanced portfolio with strong North American focus and moderate sector diversification
Report created on Jan 8, 2025Risk profile
4/7
Diversification profile
3/5
Positions
-
VE Vanguard All-Equity ETF Portfolio
VEQT - CA92201C1077 50.00% -
ZS BMO S&P 500 Index ETF
ZSP-U - CA05575T1185 50.00%
The portfolio consists of two ETFs, each making up 50% of the total allocation. This structure provides a straightforward, equal-weighted approach. While it may seem balanced, such a composition could limit exposure to other asset classes, like bonds or international equities, which are often included in diversified portfolios. Balancing between different asset classes is essential for mitigating risk and capturing growth opportunities across various market conditions. Consider incorporating additional asset types to enhance diversification and potentially improve risk-adjusted returns.
Growth
Historically, the portfolio has performed well, boasting a Compound Annual Growth Rate (CAGR) of 14.73%. However, it also experienced a significant maximum drawdown of -32.13%, highlighting potential volatility. Comparing this to common benchmarks, the portfolio's return is strong, but the drawdown suggests a need for risk management strategies. While past performance is not indicative of future results, understanding these trends can guide future adjustments. Consider strategies to mitigate downturns, such as diversifying into less volatile assets or sectors.
Projection
A Monte Carlo simulation, which uses historical data to predict future performance, shows promising outcomes for this portfolio. With 1,000 simulations, the median projection indicates a potential growth of 570.64%. However, it's crucial to remember that these projections are based on historical data and assumptions, which cannot guarantee future results. The portfolio's high percentile projections suggest strong growth potential, but it's wise to remain cautious. Regularly review the portfolio's performance and adjust allocations to align with changing market conditions.
Asset classes
- US Equity 23%
- Stocks 15%
The portfolio's asset allocation is heavily skewed towards equities, with a minimal cash position and negligible other asset classes. This concentration in equities can drive growth but also increases exposure to market volatility. Compared to a typical balanced benchmark, which might include bonds and other fixed-income assets, this portfolio is less diversified. To enhance stability, consider incorporating fixed-income or alternative assets. This could help cushion against equity market fluctuations and provide a more stable return profile over time.
Sectors
- Financials 11%
- Technology 10%
- Industrials 6%
- Consumer Discretionary 4%
- Energy 4%
- Health Care 4%
- Basic Materials 3%
- Telecommunications 3%
- Consumer Staples 3%
- Utilities 1%
- Real Estate 1%
Sector allocation is moderately diversified, with significant exposure to financial services and technology. These sectors can be growth drivers but may also introduce volatility, especially during economic shifts or interest rate changes. Compared to common benchmarks, the portfolio's sector spread is relatively balanced, yet some areas like utilities and real estate are underrepresented. To mitigate sector-specific risks, consider increasing exposure to these areas. This can help stabilize returns and provide growth opportunities across different market environments.
Regions
- North America 39%
- Europe Developed 5%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 1%
- Australasia 1%
Geographically, the portfolio is heavily weighted towards North America, with limited exposure to other regions. This concentration can benefit from strong North American markets but may also miss opportunities in emerging markets or other global regions. Compared to a global benchmark, this portfolio lacks geographic diversification, which can be crucial for managing regional risks. Consider increasing exposure to underrepresented regions to capture growth opportunities and enhance diversification. This can help balance potential downturns in North American markets.
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 could potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting asset allocations to maximize returns for a given level of risk. While the current allocation is straightforward, exploring different combinations of assets could enhance efficiency. It's important to note that optimization focuses on existing assets and doesn't necessarily address diversification or other investment goals. Regularly reviewing and adjusting allocations can help maintain an optimal risk-return balance.
Dividends
- BMO S&P 500 Index ETF 0.50%
- Weighted yield (per year) 0.25%
The portfolio's dividend yield is relatively low, with the BMO S&P 500 Index ETF yielding 0.5%. This suggests a focus on capital appreciation rather than income generation. For investors seeking regular income, this yield might be insufficient. Dividends can provide a steady income stream and reduce reliance on market appreciation for returns. If income is a priority, consider reallocating to include higher-yielding assets. This could involve exploring dividend-focused funds or sectors known for stable payouts, enhancing the portfolio's income potential.
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