Balanced Portfolio with Moderate Diversification and High North American Exposure

Report created on Jul 23, 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 composed of four ETFs, each holding a 25% weight: iShares Global Healthcare ETF, Invesco NASDAQ 100 ETF, Vanguard Energy Index Fund ETF Shares, and Financial Select Sector SPDR Fund. This setup suggests a balanced approach with a focus on sector-specific investments. However, the concentration in just four ETFs may limit diversification benefits. Balancing between various sectors can offer growth potential but also exposes the portfolio to sector-specific risks. To improve diversification, consider adding ETFs that cover different asset classes or sectors not yet represented.

Growth Info

Historically, the portfolio has shown a commendable performance with a CAGR of 22.02%. The maximum drawdown of -17.08% indicates moderate risk, which is consistent with a balanced risk classification. The portfolio's returns are highly concentrated, with 90% of returns coming from just 27 days. This suggests that the portfolio benefits from significant market movements. Maintaining a balanced risk approach while seeking opportunities to reduce volatility could enhance long-term performance. Regularly reviewing the performance and making adjustments based on market conditions is advisable.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, the portfolio's future performance was projected. The 5th percentile end value is 260.06%, while the median (50th percentile) is 1,309.1%, and the 67th percentile is 1,977.33%. This indicates a wide range of potential outcomes, reflecting market uncertainties. The annualized return across simulations is 23.17%, suggesting strong growth potential. Monte Carlo simulations help in understanding potential future risks and returns. Continuously monitoring and adjusting the portfolio to align with changing risk profiles and investment goals is essential.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, making up 99.63% of the total allocation, with a small cash component of 0.37%. This high equity exposure suggests a growth-oriented strategy but also increases vulnerability to market volatility. A more diversified asset allocation, including bonds or other fixed-income assets, could help mitigate risk and provide more stability. Considering a more balanced mix of asset classes can enhance the portfolio's resilience in various market conditions.

Sectors Info

  • Health Care
    27%
  • Energy
    25%
  • Financials
    24%
  • Technology
    13%
  • Telecommunications
    4%
  • Consumer Discretionary
    3%
  • Consumer Staples
    2%
  • Industrials
    1%

Sector allocation shows significant investments in healthcare (26.60%), energy (25.05%), financial services (24.33%), and technology (13.03%). Smaller allocations are in communication services, consumer cyclicals, and other sectors. This concentration in a few sectors can lead to higher volatility if these sectors underperform. Diversifying into additional sectors can reduce sector-specific risks and improve overall portfolio stability. Regularly reviewing sector performance and rebalancing as needed can help maintain a balanced and diversified portfolio.

Regions Info

  • North America
    92%
  • Europe Developed
    7%
  • Japan
    1%

The portfolio's geographic allocation is predominantly in North America (91.56%), with smaller exposures to Europe Developed, Japan, and other regions. This heavy North American focus may limit the benefits of international diversification. Including more global exposure can reduce regional risks and capture growth opportunities in other markets. A more geographically diversified portfolio can provide better risk-adjusted returns by spreading investments across various economic regions.

Dividends Info

  • iShares Global Healthcare ETF 1.20%
  • Invesco NASDAQ 100 ETF 0.70%
  • Vanguard Energy Index Fund ETF Shares 3.00%
  • Financial Select Sector SPDR® Fund 1.40%
  • Weighted yield (per year) 1.58%

The portfolio's dividend yield is not provided, but the ETFs included typically offer varying levels of dividends. Dividends can provide a steady income stream and contribute to total returns. Evaluating the dividend yields of the ETFs and considering reinvestment strategies can enhance portfolio growth. Including high-dividend ETFs or stocks can also improve income generation, especially for investors seeking regular cash flows.

Ongoing product costs Info

  • iShares Global Healthcare ETF 0.42%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Energy Index Fund ETF Shares 0.10%
  • Financial Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.19%

The total expense ratio (TER) of the portfolio is 0.19%, which is relatively low and indicates cost-efficiency. Lower costs mean more of the returns are retained by the investor, enhancing overall performance. Keeping investment costs low is crucial for long-term success. Regularly reviewing and comparing the expense ratios of the ETFs can help in maintaining a cost-effective portfolio. Opting for low-cost investment options without compromising on quality can maximize returns.

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