A balanced Canadian portfolio with significant US equity exposure and moderate diversification

Report created on Dec 14, 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 five ETFs, with a dominant 50% allocation to the Vanguard S&P 500 Index ETF, reflecting a strong focus on US equities. The Invesco NASDAQ 100 Index ETF contributes 20%, enhancing exposure to tech-heavy US stocks. Canadian equities are represented by the Vanguard FTSE Canada All Cap ETF at 13%, while international diversification is achieved through the iShares Core MSCI EAFE IMI ETF at 13%. A small allocation of 4% to the Purpose Bitcoin ETF adds a speculative element. This composition suggests a balanced approach, aiming for growth through established markets while incorporating a minor high-risk component.

Growth Info

Historically, the portfolio has demonstrated robust performance with a compound annual growth rate (CAGR) of 16.93%. However, it has experienced a maximum drawdown of -24.1%, indicating significant volatility during downturns. The concentration of returns over just 25 days suggests that timing and market conditions heavily influence performance. While past performance can guide expectations, it doesn't guarantee future results. Investors should be prepared for periods of both high returns and potential losses, maintaining a long-term perspective to ride out market fluctuations.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, indicate a wide range of potential returns for the portfolio. With 1,000 simulations, the 5th percentile projects a 72.97% return, while the median (50th percentile) suggests a nearly 998% increase. The 67th percentile forecasts a more optimistic 1,684.48% return. While 990 simulations predict positive returns, this method doesn't account for unprecedented market events. Investors should view these projections as a spectrum of possibilities rather than certainties, maintaining flexibility in their investment strategy.

Asset classes Info

  • US Equity
    70%
  • Stocks
    13%

The portfolio is primarily invested in equities, with a substantial 69.62% in US equities and 12.94% in other equity markets. This heavy equity allocation suggests a growth-oriented strategy, benefiting from potential market gains but also subject to market volatility. The limited presence of other asset classes indicates a focus on capital appreciation over income generation or capital preservation. For those seeking enhanced diversification, incorporating fixed income or alternative investments could mitigate risk and provide a more stable return profile.

Sectors Info

  • Technology
    29%
  • Financials
    14%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Health Care
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is heavily weighted towards technology at 29.13%, followed by financial services at 13.51%. This concentration in tech reflects a bet on continued innovation and growth in this sector. However, it also exposes the portfolio to sector-specific risks, such as regulatory changes or tech market downturns. Balancing this with increased exposure to defensive sectors like consumer staples or utilities could reduce volatility. Diversifying across sectors can help manage risk and capture opportunities across different economic cycles.

Regions Info

  • North America
    82%
  • Europe Developed
    9%
  • Japan
    3%
  • Australasia
    1%

Geographically, the portfolio is predominantly North American, with 82.24% exposure. This concentration offers familiarity and stability but limits benefits from global diversification. With only 8.50% in developed Europe and minimal exposure to emerging markets, the portfolio may miss out on growth opportunities in less mature economies. Expanding geographic diversification could enhance potential returns and reduce regional risk. Investors might consider adding exposure to emerging markets or other underrepresented regions to capture global growth 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.

Optimization using the Efficient Frontier suggests reallocating existing assets to achieve the best risk-return ratio. This involves adjusting weights among current holdings to move closer to the frontier, where returns are maximized for a given level of risk. The goal isn't to diversify further but to enhance efficiency with the current asset mix. By fine-tuning allocations, investors can potentially improve returns without increasing overall risk, aligning the portfolio more closely with their investment objectives.

Dividends Info

  • Invesco NASDAQ 100 Index ETF CAD Units 0.40%
  • Vanguard FTSE Canada All Cap 1.90%
  • Vanguard S&P 500 Index ETF 0.70%
  • iShares Core MSCI EAFE IMI 2.50%
  • Weighted yield (per year) 1.00%

The portfolio's overall dividend yield is modest at 1.0%, with the iShares Core MSCI EAFE IMI ETF contributing the highest yield at 2.5%. This suggests a focus on capital appreciation over income generation. For investors seeking regular income, increasing allocations to higher-yielding assets or dividend-focused ETFs could enhance cash flow. However, balancing income with growth potential is crucial to maintain the portfolio's overall strategy and risk profile.

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