A balanced portfolio with a strong focus on US equities and minimal international exposure

Report created on Dec 30, 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 heavily weighted towards the Vanguard S&P 500 ETF, comprising 72.49% of the total. This concentration in a single ETF is significant compared to common benchmarks, which often recommend more diversification across different asset types. The remaining portfolio comprises smaller allocations to other ETFs, including the Vanguard Total World Stock Index Fund and Avantis U.S. Small Cap Value ETF. While the overall structure leans towards equities, it lacks significant exposure to bonds or other asset classes, which could enhance stability and diversification.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 15.22%, outperforming many traditional benchmarks. This impressive growth is tempered by a maximum drawdown of -23.97%, indicating potential risk during market downturns. The portfolio's performance is concentrated, with 90% of returns occurring over just 21 days. While past performance is promising, it's essential to remember that historical data doesn't guarantee future success. Investors should consider diversifying further to mitigate potential risks.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 18.08%. The simulations, which consider historical data, indicate a 5th percentile outcome of 135.9% and a 67th percentile of 1,148.06%. While these projections highlight potential for significant growth, they are based on historical trends and assumptions that may not hold in the future. Investors should use these simulations as a guide but remain cautious about over-reliance on projected returns.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly allocated to stocks, representing 99.8% of assets, with negligible exposure to cash and other asset classes. This heavy stock allocation suggests a focus on growth but also increases vulnerability to market volatility. Compared to common benchmarks, which often include a mix of bonds and other assets, this portfolio may benefit from diversification into non-equity classes to reduce risk and improve stability, particularly during market downturns.

Sectors Info

  • Technology
    30%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation reveals a significant concentration in technology, comprising 29.97% of the portfolio. This tech-heavy focus aligns with recent market trends but may increase volatility, especially during periods of interest rate hikes or tech sector downturns. Other sectors, such as financial services and consumer cyclicals, provide some balance, but the overall sector distribution could benefit from more diversification to mitigate risk from sector-specific downturns.

Regions Info

  • North America
    95%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographic exposure is heavily skewed towards North America, accounting for 95.21% of the portfolio. This concentration limits international diversification and exposes the portfolio to regional risks. Compared to global benchmarks, which typically include more balanced geographic allocations, this portfolio may benefit from increasing exposure to other regions. Diversifying geographically can reduce risk and provide opportunities in emerging markets or regions with different economic cycles.

Redundant positions Info

  • Vanguard Total World Stock Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes highly correlated assets, particularly between the Vanguard Total World Stock Index Fund ETF Shares and the Vanguard S&P 500 ETF. This correlation suggests limited diversification benefits, as these assets tend to move together in response to market events. High correlation can reduce the portfolio's ability to withstand market downturns, emphasizing the need to consider uncorrelated or less correlated assets to enhance diversification and risk management.

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.

Portfolio optimization suggests a need to address overlapping, highly correlated assets that offer limited diversification benefits. By reallocating investments among the current assets, the portfolio can approach the Efficient Frontier, achieving the best possible risk-return ratio. This optimization focuses on improving the balance between risk and return without necessarily increasing diversification. Investors should consider adjustments to enhance efficiency while maintaining alignment with their investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Invesco S&P 500® Pure Value ETF 1.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.29%

The portfolio's overall dividend yield is 1.29%, with contributions from various ETFs, including the Vanguard S&P 500 ETF at 1.2%. While dividends provide a steady income stream, the yield is relatively modest. For investors seeking income, exploring higher-yielding assets or strategies could enhance returns. However, focusing solely on dividends may not align with growth-oriented goals, so it's essential to balance income with overall portfolio objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Invesco S&P 500® Pure Value ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, supporting better long-term performance by minimizing costs. The Vanguard S&P 500 ETF, with a TER of 0.03%, is particularly cost-effective. Keeping costs low is crucial for maximizing net returns over time. Investors should continue monitoring expense ratios, considering lower-cost alternatives if necessary, to ensure that fees do not erode potential gains.

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