Balanced Portfolio with Strong US Equity Focus and High Dividend Yield

Report created on Dec 3, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily weighted towards a Vanguard S&P 500 Index ETF, accounting for over half of the allocation. This US-focused ETF provides broad exposure to large-cap equities, which drives the portfolio’s overall performance. Additionally, the BMO Canadian High Dividend Covered Call ETF offers a significant portion of the allocation, contributing to the portfolio’s income through dividends. Suncor Energy Inc and Algonquin Power & Utilities Corp, though minor holdings, add some individual stock exposure. The portfolio's structure indicates a preference for ETFs, allowing for ease of management and diversification within the chosen funds.

Growth Info

Historically, the portfolio has performed well, boasting a compound annual growth rate of 12.7%. This indicates a strong return on investment over time, although it has experienced a maximum drawdown of -33.19%, suggesting vulnerability to market downturns. The portfolio's returns are concentrated in a small number of days, which is common for equity-heavy portfolios. This highlights the importance of staying invested to capture these high-return periods. Overall, the historical performance reflects a balance between growth and risk, aligning with the portfolio’s balanced risk classification.

Projection Info

Using a Monte Carlo simulation, which involves running thousands of simulations to project future performance, the portfolio shows a range of potential outcomes. With an assumed initial investment, the median outcome suggests a 155.74% increase, while the 5th percentile could see a -52.92% decline. On the upside, the 67th percentile projects a 283.59% gain. The simulation suggests a 9.97% annualized return across all scenarios. This analysis underscores the portfolio's potential for strong growth, while also highlighting the inherent risks associated with market volatility.

Asset classes Info

  • US Equity
    57%
  • Stocks
    33%
  • Stocks
    9%

The portfolio is predominantly composed of US Equity, making up 57.24% of the allocation. This is complemented by a mix of other equities and stocks, with a small cash position. The focus on US Equity aligns with the objective of capturing growth from large-cap US companies. However, the concentration in a single asset class increases vulnerability to market-specific risks. To enhance resilience, consider diversifying into other asset classes such as bonds or international equities, which can provide stability and reduce overall portfolio risk.

Sectors Info

  • Financials
    21%
  • Technology
    19%
  • Energy
    16%
  • Telecommunications
    8%
  • Industrials
    8%
  • Consumer Discretionary
    7%
  • Health Care
    6%
  • Utilities
    6%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Real Estate
    1%

Sector allocation in the portfolio is diverse, with notable exposure to Financial Services, Technology, and Energy. These sectors are known for their growth potential and can drive portfolio performance. However, the concentration in these sectors could lead to higher volatility if they underperform. A more balanced sector allocation could mitigate this risk by spreading exposure across defensive sectors like Consumer Defensive or Utilities. This would provide a cushion during economic downturns and ensure a more stable performance over time.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly concentrated in North America, accounting for over 99% of the allocation. This reflects a strong home bias, which can be advantageous given familiarity with the region. However, it also limits exposure to growth opportunities in other parts of the world. To enhance geographic diversification and capture potential global growth, consider allocating a portion of the portfolio to international markets. This can help reduce regional risk and provide access to emerging markets with high growth potential.

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 optimization chart suggests potential for improvement. To achieve a riskier portfolio, consider increasing equity exposure or reallocating towards higher-growth sectors. For a more conservative approach, consider adding bonds or reducing exposure to volatile sectors. Moving along the efficient frontier can help balance risk and return, aligning with personal investment goals. However, given the current concentration in US equities, geographic diversification should be a priority before making further optimizations. This ensures a well-rounded portfolio capable of withstanding various market conditions.

Dividends Info

  • Algonquin Power & Utilities Corp 7.80%
  • Suncor Energy Inc 2.20%
  • Vanguard S&P 500 Index ETF 1.00%
  • BMO Canadian High Dividend Covered Call 6.50%
  • Weighted yield (per year) 3.03%

The portfolio offers a respectable dividend yield of 3.03%, driven by the BMO Canadian High Dividend Covered Call ETF and Algonquin Power & Utilities Corp. These dividends provide a steady income stream, which can be reinvested to compound returns over time. The presence of high dividend-paying assets supports income-focused investment goals. To further enhance dividend income, consider increasing exposure to dividend-focused ETFs or stocks. However, ensure that the pursuit of higher yields does not compromise the overall risk and growth potential of the portfolio.

Ongoing product costs Info

  • BMO Canadian High Dividend Covered Call 0.65%
  • Weighted costs total (per year) 0.21%

The portfolio’s costs are relatively low, with the BMO Canadian High Dividend Covered Call ETF having a Total Expense Ratio (TER) of 0.65%. The overall TER of 0.21% is competitive, ensuring that costs do not significantly erode returns. Keeping investment costs low is crucial for maximizing net returns over time. Regularly reviewing and comparing fees across similar investment options can help maintain cost efficiency. Consider exploring lower-cost alternatives if available, but ensure that any changes align with the portfolio’s overall strategy and objectives.

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