Balanced Diversified Portfolio with Strong Global Exposure and Potential for High Returns through Strategic Optimization

Report created on Dec 3, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of three ETFs, with a significant allocation to Vanguard's Total International Stock Index Fund ETF Shares at 70%, followed by 25% in the Vanguard Total Stock Market Index Fund ETF Shares, and a smaller 5% in the Invesco Solar ETF. This composition indicates a strong emphasis on broad market exposure with a tilt towards international equities. The inclusion of the solar ETF adds a touch of thematic investing, albeit with a limited impact due to its small size. Overall, the portfolio is broadly diversified, offering exposure across various markets and sectors, which is ideal for balanced growth.

Growth Info

A hypothetical initial investment in this portfolio has historically grown at a compound annual growth rate (CAGR) of 8.51%. However, it's essential to note the portfolio's maximum drawdown of -34.57%, indicating potential volatility during market downturns. The concentrated days that make up 90% of returns suggest that timing and market conditions play a critical role in performance. Understanding these dynamics is crucial for setting realistic expectations and maintaining a long-term perspective. Regularly reviewing historical performance can help identify trends and adjust strategies accordingly to maximize returns while managing risk.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes, with a 50th percentile return of 178.03% and a 67th percentile return of 313.66%. The simulation suggests an annualized return of 10.6%, indicating solid growth potential. Monte Carlo simulations provide valuable insights into future performance by considering various market scenarios, helping investors understand potential risks and rewards. While projections are not guarantees, they offer a framework for setting expectations and making informed decisions. Continual assessment can ensure the portfolio remains aligned with financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 98.88% allocated to equities, and minimal exposure to cash and other asset classes. This allocation reflects a growth-oriented strategy, focusing on capital appreciation through equity investments. While stocks offer higher potential returns, they also come with increased volatility. Diversifying across asset classes can help balance risk and provide stability during market fluctuations. Considering the current allocation, incorporating fixed-income securities or alternative investments could enhance diversification and reduce overall portfolio risk, aligning with a balanced investment approach.

Sectors Info

  • Technology
    20%
  • Financials
    18%
  • Industrials
    13%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Consumer Staples
    6%
  • Telecommunications
    6%
  • Basic Materials
    6%
  • Energy
    4%
  • Utilities
    4%
  • Real Estate
    3%

The portfolio is well-diversified across various sectors, with significant allocations in Technology, Financial Services, and Industrials. This sector allocation provides a balanced mix of growth and stability, capitalizing on different economic cycles. However, the concentrated exposure in certain sectors may increase risk if those industries face downturns. Continually monitoring sector performance and adjusting allocations can help mitigate risk and capitalize on emerging opportunities. Ensuring sector diversity aligns with broader market trends will enhance the portfolio's resilience and potential for long-term growth.

Regions Info

  • North America
    33%
  • Europe Developed
    28%
  • Asia Emerging
    13%
  • Japan
    11%
  • Asia Developed
    8%
  • Australasia
    4%
  • Africa/Middle East
    3%
  • Latin America
    1%

The portfolio's geographic allocation is diverse, with significant exposure to North America, Europe, and Asia. This global diversification reduces reliance on any single region, spreading risk across various economic environments. Such exposure allows investors to benefit from growth in different markets, potentially enhancing returns. However, it also introduces currency and geopolitical risks, which should be considered in the investment strategy. Regularly reviewing geographic allocations and staying informed about global economic developments can help optimize the portfolio's performance and ensure alignment with investment goals.

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 can be optimized by exploring the efficient frontier, which offers a path to higher returns for the same risk or reduced risk for similar returns. While the current portfolio is well-diversified, there is potential to enhance performance by reallocating assets strategically. Moving along the efficient frontier involves adjusting allocations to achieve a more efficient risk-return profile. This process requires careful analysis of market conditions, risk tolerance, and investment objectives. By optimizing the portfolio, investors can potentially achieve better outcomes while maintaining their desired level of risk exposure.

Dividends Info

  • Invesco Solar ETF 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.40%

The portfolio offers a total dividend yield of 2.4%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the most at 3.0%. Dividends provide a steady income stream, enhancing total returns and offering a cushion during market volatility. While the yield is moderate, reinvesting dividends can compound returns over time, contributing to long-term growth. Monitoring dividend policies and yield sustainability is essential for maintaining income stability. Adjusting the portfolio to include higher-yielding assets can increase income potential, aligning with income-focused investment objectives.

Ongoing product costs Info

  • Invesco Solar ETF 0.67%
  • 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) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, with the Invesco Solar ETF having the highest cost at 0.67%. Low costs are crucial for maximizing net returns, as high fees can erode performance over time. The overall cost efficiency of the portfolio is commendable, given its diversification and exposure. Continually reviewing expense ratios and seeking cost-effective investment options can further enhance returns. Keeping costs low while maintaining diversification and exposure to growth opportunities is a key strategy for optimizing portfolio performance and achieving financial goals.

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