A balanced portfolio with strong North American focus and moderate sector diversification

Report created on Dec 23, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio comprises a mix of ETFs, with a significant emphasis on equity investments. The Vanguard All-Equity ETF and Vanguard S&P 500 Index ETF each constitute 25% of the portfolio, highlighting a strong focus on broad market exposure. The remaining allocation includes a mix of sector-specific and regional ETFs, such as the iShares NASDAQ 100 and BMO MSCI India ESG Leaders Index. Compared to common benchmarks, this composition leans heavily towards equities, which aligns with a growth-focused strategy but may lack fixed-income diversification typical of balanced portfolios.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 14.45%, indicating strong past performance. This growth rate is impressive compared to typical benchmark indices, suggesting effective asset selection and timing. However, the maximum drawdown of -32.66% reflects significant volatility, which is common in equity-heavy portfolios. While historical performance provides insights, it’s crucial to remember that past returns do not guarantee future success. Investors should remain mindful of potential fluctuations and manage expectations accordingly.

Projection Info

Forward projections using Monte Carlo simulations, which model potential outcomes based on historical data, indicate a median projected growth of 426.21%. With 990 out of 1,000 simulations showing positive returns, the outlook appears optimistic. While these simulations offer insights into potential future performance, they rely on historical patterns and cannot account for unprecedented market shifts. Investors should use these projections as a guide rather than a certainty, maintaining flexibility in their investment approach.

Asset classes Info

  • US Equity
    51%
  • Stocks
    27%

The portfolio is heavily weighted toward equities, with over 78% allocated to North American markets. This allocation provides exposure to stable, mature markets but may limit diversification benefits. The absence of fixed-income investments suggests a focus on growth, which aligns with the profile of a balanced investor seeking higher returns. To enhance diversification, consider incorporating other asset classes such as bonds or commodities, which can provide stability during market downturns.

Sectors Info

  • Technology
    24%
  • Financials
    16%
  • Real Estate
    11%
  • Consumer Discretionary
    10%
  • Industrials
    8%
  • Telecommunications
    8%
  • Health Care
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    2%

Sector allocation reveals a concentration in technology (23.57%) and financial services (15.68%), which are significant drivers of global growth. Real estate and consumer cyclicals also feature prominently. This sectoral mix can lead to higher volatility, particularly during economic shifts affecting these areas. While the technology sector offers growth potential, it can be sensitive to interest rate changes. Balancing sector exposure by adding defensive sectors like utilities or healthcare could mitigate risk.

Regions Info

  • North America
    79%
  • Asia Emerging
    11%
  • Europe Developed
    8%
  • Japan
    1%
  • Asia Developed
    1%

The portfolio's geographic exposure is predominantly North American (78.51%), with limited representation from other regions. This focus on North America provides stability but may miss opportunities in emerging markets, which can offer higher growth potential. The current allocation includes some exposure to Asia and Europe, yet increasing diversification across more regions could reduce risk and improve returns. Consider expanding geographic reach to capture global economic trends.

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 benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the current asset allocation to maximize returns for a given level of risk. While the portfolio is well-structured, exploring rebalancing opportunities can enhance efficiency. Keep in mind that optimization focuses solely on existing assets and may not address broader diversification goals.

Dividends Info

  • Vanguard All-Equity ETF Portfolio 1.50%
  • Vanguard S&P 500 Index ETF 0.70%
  • iShares S&P/TSX 60 1.40%
  • iShares NASDAQ 100 (CAD Hedged) 0.30%
  • BMO MSCI India ESG Leaders Index ETF 1.00%
  • BMO Equal Weight REITs 3.00%
  • BMO Europe High Dividend Covered Call CAD Hedged 4.20%
  • Weighted yield (per year) 1.34%

The portfolio's overall dividend yield is 1.34%, with the BMO Europe High Dividend Covered Call ETF contributing the highest yield at 4.2%. While dividends provide a steady income stream, the focus remains on growth through capital appreciation. Investors seeking income may consider increasing exposure to higher-yielding assets. Balancing growth and income-generating investments can enhance overall portfolio performance, providing both stability and growth potential.

Ongoing product costs Info

  • BMO Europe High Dividend Covered Call CAD Hedged 0.65%
  • Weighted costs total (per year) 0.03%

The total expense ratio (TER) for the portfolio is impressively low at 0.03%, with the exception of the BMO Europe High Dividend Covered Call ETF at 0.65%. Lower costs are beneficial for long-term performance as they minimize the drag on returns. However, it’s essential to evaluate whether the higher-cost ETF’s benefits justify its expense. Regularly reviewing and optimizing for cost efficiency can lead to substantial savings over time, enhancing net returns.

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