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A balanced portfolio with a strong US focus and significant technology exposure

Report created on Jan 14, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification
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Positions

The portfolio is predominantly composed of US-based ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 40%. This is complemented by growth, dividend, and technology-focused ETFs, reflecting a strong emphasis on equity. The portfolio also includes a small allocation to short-term treasury bonds, providing a minor cash cushion. Compared to typical balanced portfolios, this one leans heavily towards equities, suggesting a focus on growth over income or stability. A more diversified asset mix could enhance risk management and potentially improve long-term returns.

Growth Info

Historically, the portfolio has delivered an impressive compound annual growth rate (CAGR) of 16.55%, considerably outperforming many benchmarks. However, it also experienced a maximum drawdown of -25.45%, indicating significant volatility. While past performance is not indicative of future results, these figures suggest the portfolio has been effective in capturing market upswings, though susceptible to downturns. To mitigate future risks, consider incorporating more defensive assets or diversifying across asset classes.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with a 50th percentile return of 616.27%. These simulations use historical data to estimate future performance, but it's important to note that they cannot predict exact outcomes. The portfolio's high equity concentration may drive substantial growth, but also poses risks. To enhance potential outcomes, consider balancing high-growth assets with more stable investments, acknowledging the inherent uncertainty in projections.

Asset classes Info

  • Stocks
    95%
  • Cash
    5%

The portfolio's asset allocation is heavily skewed towards stocks, comprising nearly 95% of the total. This high equity exposure aligns with a growth-focused strategy but limits diversification benefits typically gained from including bonds or alternative assets. Compared to benchmark norms, which often include a higher proportion of bonds, this allocation suggests a higher risk tolerance. For improved risk management, consider increasing exposure to other asset classes like fixed income or real assets.

Sectors Info

  • Technology
    39%
  • Financials
    11%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    1%

The portfolio is notably concentrated in the technology sector, which constitutes approximately 39% of the total allocation. This focus can lead to higher returns during tech booms but also increases vulnerability to sector-specific downturns. Other sectors like financial services and healthcare are present but with significantly lower weightings. To reduce sector-specific risk, consider diversifying into underrepresented sectors, which can help stabilize returns across different market conditions.

Regions Info

  • North America
    94%

Geographically, the portfolio is overwhelmingly concentrated in North America, with over 94% exposure. This focus provides familiarity and potential stability but limits the benefits of international diversification. Global diversification can reduce regional risk and capture growth opportunities in emerging markets. To enhance geographic diversification, consider increasing exposure to developed and emerging markets outside North America, which may offer a broader range of growth opportunities.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Information Technology Index Fund ETF Shares
    Vanguard S&P 500 Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains several highly correlated assets, particularly among the Vanguard ETFs that track similar indices. High correlation means these assets tend to move in tandem, reducing diversification benefits and potentially increasing risk during market downturns. By replacing some of these overlapping assets with less correlated ones, the portfolio could achieve better diversification and improved risk management. Consider exploring asset classes or sectors that exhibit lower correlation to the existing holdings.

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.

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The portfolio could be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets and allocations. However, the presence of highly correlated assets suggests limited diversification benefits, potentially hindering optimization. To achieve a more efficient portfolio, consider reducing asset overlap and exploring alternative investments that offer unique risk-return profiles. This approach can help align the portfolio more closely with the Efficient Frontier.

Dividends Info

  • iShares® 0-3 Month Treasury Bond ETF 5.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Value Index Fund ETF Shares 2.30%
  • Weighted yield (per year) 1.33%

The portfolio's dividend yield stands at 1.33%, primarily driven by the Vanguard Dividend Appreciation Index Fund. While not particularly high, this yield provides a modest income stream, complementing the growth-oriented strategy. For investors seeking higher income, consider reallocating to assets with stronger dividend yields. However, ensure that any changes align with overall investment goals and risk tolerance, as chasing yield can sometimes lead to increased risk.

Ongoing product costs Info

  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.06%

The portfolio boasts a low total expense ratio (TER) of 0.06%, which is commendable and supports better long-term performance by minimizing costs. Low fees are crucial as they compound over time, enhancing net returns. Maintaining this cost efficiency is beneficial, but regular reviews are recommended to ensure no hidden fees arise. Consider periodically comparing current holdings with similar low-cost alternatives to ensure ongoing cost-effectiveness.

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