Balanced Portfolio with High North American Exposure and Strong Technology Focus

Report created on Dec 2, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of ETFs, with the Vanguard Total Stock Market Index Fund ETF Shares forming the largest portion at 69.35%. This indicates a strong preference for broad market exposure. The remaining investments include international and Nasdaq-focused ETFs, providing some level of diversification. The inclusion of the S&P 500 ETF further emphasizes a focus on large-cap U.S. equities. Overall, the portfolio is moderately diversified, which aligns with the balanced risk classification. This composition can be beneficial for those seeking steady growth with moderate risk, but it may lack diversification across asset classes.

Growth Info

Historically, the portfolio has shown a robust performance with a CAGR of 13.25%. This suggests that the investment choices have been effective in capturing market gains over time. However, the maximum drawdown of -34.11% highlights the potential for significant losses during market downturns. The fact that only 31 days make up 90% of returns indicates a concentration of performance in a few periods, which can be risky. While the past performance is impressive, it is crucial to remain mindful of the associated risks and consider strategies to mitigate drawdowns.

Projection Info

Using a Monte Carlo simulation with 1,000 scenarios, the portfolio's future returns were projected. The simulation assumes a hypothetical initial investment and provides a range of potential outcomes. The results show a 5th percentile return of 68.41% and a 67th percentile return of 595.34%, with an annualized return of 13.75%. This suggests a high likelihood of positive returns, as evidenced by 998 simulations with gains. Monte Carlo simulations help in understanding the range of possible outcomes, offering a probabilistic view of future performance. While the projections are optimistic, they should be considered alongside market conditions and personal risk tolerance.

Asset classes Info

  • Stocks
    100%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.64% allocated to this asset class. This high concentration in equities suggests a growth-oriented strategy, which can lead to substantial returns but also increases exposure to market volatility. A small portion of cash is included, providing some liquidity, but it is negligible in terms of diversification. To reduce risk, it may be beneficial to consider adding other asset classes such as bonds, which can provide stability and income. Diversifying across asset classes can help balance the portfolio and protect against downturns.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

The sector allocation within the portfolio shows a significant tilt towards technology, which comprises 31.02% of the investments. This focus on tech can drive growth, given the sector's potential for innovation and expansion. However, it also introduces sector-specific risks, such as regulatory changes or technological disruptions. Other sectors like financial services and consumer cyclicals are also represented but to a lesser extent. To mitigate sector risk, it may be advisable to diversify further into sectors with lower representation, ensuring a more balanced exposure to various economic cycles.

Regions Info

  • North America
    88%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America, with 88.15% of assets allocated to this region. This concentration reflects a strong belief in the North American market's growth prospects but also exposes the portfolio to regional risks. Limited exposure to other regions like Europe, Asia, and Latin America suggests a potential area for diversification. By broadening geographic allocation, the portfolio can benefit from growth opportunities in emerging markets and reduce dependency on any single region's economic performance. This strategy can enhance overall resilience and long-term returns.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. This correlation indicates that these investments tend to move in the same direction, offering limited diversification benefits. While correlation can enhance returns during market upswings, it can also amplify losses during downturns. To improve diversification, consider reducing exposure to overlapping assets and incorporating investments with lower correlations. This approach can help smooth out volatility and enhance the portfolio's risk-adjusted performance over time.

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, it's essential to address the issue of overlapping, highly correlated assets, which do not provide diversification benefits. Once this is resolved, the portfolio can be adjusted along the efficient frontier to achieve the desired risk-return balance. Moving towards the frontier can help in either increasing returns or reducing risk. For a riskier portfolio, consider allocating more to equities, while a more conservative approach would involve increasing exposure to bonds. It's crucial to align these adjustments with personal risk tolerance and financial goals for optimal portfolio performance.

Dividends Info

  • Fidelity® Nasdaq Composite Index® ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.35%

The portfolio's dividend yield stands at 1.35%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 3.0%. This yield provides a modest income stream, which can be appealing for investors seeking regular cash flow. However, the overall yield is relatively low, reflecting the portfolio's growth-oriented focus. While dividends can offer stability and income, they should not be the sole consideration. Balancing growth and income strategies can lead to a more comprehensive investment approach, aligning with long-term financial goals and risk tolerance.

Ongoing product costs Info

  • Fidelity® Nasdaq Composite Index® ETF 0.21%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, which is relatively low and indicates cost-efficient management. The Vanguard ETFs contribute to this low cost, with expense ratios as low as 0.03%. Keeping investment costs low is crucial for maximizing returns, as high fees can erode gains over time. The Fidelity Nasdaq Composite Index ETF has a slightly higher expense ratio at 0.21%, but it remains reasonable. Maintaining a focus on cost-effective investments can enhance overall performance. Regularly reviewing and comparing expense ratios can ensure that the portfolio remains competitive and aligned with cost-saving objectives.

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