A balanced portfolio with high exposure to US equities and minimal geographic diversification
Report created on Dec 15, 2024Risk profile
4/7
Diversification profile
2/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 70.00% -
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 30.00%
This portfolio is composed of two major ETFs: Vanguard S&P 500 ETF at 70% and Invesco NASDAQ 100 ETF at 30%. Both ETFs are equity-based, providing significant exposure to large-cap US stocks. The high allocation to these ETFs suggests a focus on established markets and companies. While this provides stability and potential for growth, the lack of diversification into other asset classes like bonds or commodities could expose the portfolio to higher volatility. To balance risk, consider integrating other asset types that can offer stability during market downturns.
Growth
Historically, this portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 16.33%. This indicates strong past growth, largely driven by the robust performance of US equities. However, it's important to remember that past performance does not guarantee future results. The max drawdown of -27.42% reflects potential significant short-term losses during market downturns. Investors should be prepared for such volatility and consider if they have the risk tolerance to withstand these fluctuations.
Projection
Forward projections using Monte Carlo simulations show a wide range of potential outcomes. The Monte Carlo method uses historical data to simulate future returns, providing a probabilistic view of the portfolio's potential performance. The 5th percentile projection shows a portfolio value increase of 162.5%, while the 67th percentile shows a 1,063.52% increase. While the simulations suggest a high likelihood of positive returns, they rely on historical data and assumptions that may not hold in the future. Regularly review and adjust the portfolio to align with changing market conditions.
Asset classes
- Stocks 100%
The portfolio is heavily weighted towards stocks, with 99.93% of assets in equities and a negligible amount in cash. This concentration in a single asset class can lead to higher volatility, especially during market corrections. Diversifying across different asset classes, such as bonds or real estate, can help mitigate risk and provide a more balanced risk-return profile. Consider adding assets with low correlation to equities to enhance diversification and reduce overall portfolio risk.
Sectors
- Technology 38%
- Consumer Discretionary 11%
- Telecommunications 11%
- Health Care 9%
- Financials 9%
- Industrials 6%
- Consumer Staples 6%
- Energy 3%
- Utilities 2%
- Basic Materials 2%
- Real Estate 2%
The portfolio's sector allocation shows a notable concentration in technology at 38.43%, followed by consumer cyclicals and communication services. This concentration can lead to sector-specific risks, especially if these industries face downturns. While technology has been a strong performer, it's essential to maintain a balanced sector allocation to protect against sector-specific volatility. Consider diversifying into sectors with lower current representation, such as basic materials or real estate, for a more balanced approach.
Regions
- North America 99%
- Europe Developed 1%
The portfolio is predominantly invested in North American equities, accounting for 98.85% of its geographic allocation. This heavy concentration in one region limits exposure to international markets, which can offer diversification benefits and reduce regional risk. By including assets from other regions like Europe or Asia, the portfolio can potentially enhance returns and reduce volatility. Consider exploring opportunities in emerging markets, which may provide growth potential and diversification benefits.
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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocation between the current assets, it may be possible to improve the portfolio's efficiency. However, this optimization focuses on maximizing returns for a given level of risk, and may not address other objectives like diversification or income generation. Consider rebalancing the portfolio periodically to maintain alignment with your risk tolerance and investment goals.
Dividends
- Invesco NASDAQ 100 ETF 0.60%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 1.02%
The portfolio's dividend yield is 1.02%, with the Vanguard S&P 500 ETF contributing 1.2% and the Invesco NASDAQ 100 ETF 0.6%. While dividends provide a steady income stream, the current yield is relatively modest. For investors seeking higher income, consider adding dividend-focused ETFs or stocks to the portfolio. This can enhance cash flow and provide a buffer during market downturns, without significantly altering the portfolio's risk profile.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.07%
The portfolio's total expense ratio (TER) is 0.07%, with the Vanguard S&P 500 ETF at 0.03% and the Invesco NASDAQ 100 ETF at 0.15%. These are relatively low costs, which is advantageous for long-term performance as lower fees mean more of your returns are retained. However, always be on the lookout for opportunities to further reduce costs, as even small savings can compound over time. Regularly review and compare ETF fees to ensure cost-effectiveness.
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