A balanced portfolio with a strong U.S. focus and tech-heavy sector exposure

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

The portfolio is predominantly composed of U.S. equity ETFs, with a significant portion (47.6%) allocated to the Vanguard S&P 500 ETF. This indicates a strong bias towards large-cap U.S. stocks. Compared to typical balanced portfolios, this one leans heavily into equities, with minimal exposure to international markets and other asset classes. While this composition can drive growth, it may lack the diversification seen in more globally spread portfolios. To enhance balance, consider incorporating more fixed income or international equities to mitigate potential U.S.-specific risks.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 14.94%, outperforming many benchmarks. However, it also experienced a maximum drawdown of -26.48%, indicating significant volatility during market downturns. While strong past performance is encouraging, it's important to remember that past results do not predict future outcomes. To manage volatility, consider diversifying into less correlated assets that could provide stability during market corrections.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected under various scenarios, with a median expected growth of 418.8%. Monte Carlo analysis uses historical data to simulate thousands of potential outcomes, providing a range of possibilities rather than a single forecast. While the projections appear promising, they are based on historical trends and assumptions that may not hold. Regularly reviewing and adjusting the portfolio in response to market changes can help maintain alignment with your investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, accounting for over 99% of the assets, which is significantly higher than typical balanced portfolios. This allocation limits diversification benefits that can be achieved by including bonds or other asset classes. A diversified mix of asset classes can help reduce risk and stabilize returns. To improve diversification, consider adding fixed income or alternative investments, which can provide a buffer against equity market volatility.

Sectors Info

  • Technology
    35%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    11%
  • Health Care
    10%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is concentrated in the technology sector, representing 34.8% of the allocation. This is considerably higher than common benchmarks, which generally have a more balanced sector distribution. While technology has been a strong performer, its high volatility can increase risk during market downturns. Balancing sector allocations by increasing exposure to underrepresented areas, such as healthcare or consumer staples, can help mitigate sector-specific risks and enhance portfolio resilience.

Regions Info

  • North America
    95%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographic exposure is predominantly in North America, with 94.6% of the allocation, which limits international diversification. This concentration exposes the portfolio to U.S. market-specific risks and misses out on potential growth opportunities in emerging markets. Expanding geographic diversification by increasing allocations to regions like Europe, Asia, or Latin America can provide exposure to different economic cycles and enhance overall portfolio stability.

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 S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, reducing diversification benefits. During market downturns, correlated assets may not provide the desired risk mitigation. Consider replacing one of these with a less correlated investment to improve diversification and reduce overall portfolio risk.

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 asset weights to maximize returns for a given level of risk. However, optimization is based on current assets and their historical performance, which may not predict future results. Consider rebalancing the portfolio periodically to maintain its efficiency, keeping in mind your risk tolerance and investment goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.50%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.09%

The portfolio's dividend yield stands at 1.09%, which is relatively modest. This yield is primarily driven by the Schwab U.S. Dividend Equity ETF, which offers a higher yield of 3.7%. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. If income generation is a goal, consider increasing exposure to high-dividend-paying assets or funds to enhance the portfolio's yield.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • 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) 0.07%

The portfolio's total expense ratio (TER) is low at 0.07%, which is beneficial for long-term returns. Lower costs mean more of your investment returns stay in your pocket rather than being eaten up by fees. This cost efficiency aligns well with best practices for portfolio management. Continue to monitor and compare fees across similar investments to ensure the portfolio remains cost-effective and competitive.

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