A balanced portfolio with a strong focus on US equities and moderate sector diversification

Report created on Dec 21, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equity, with a 92.36% allocation in stocks. Bonds make up a small portion at 6.69%, and cash and other assets are minimal. This composition aligns with a balanced risk profile, focusing on growth while maintaining some defensive assets. A common benchmark for balanced portfolios might include a higher bond allocation for risk mitigation. Consider adjusting the bond allocation to enhance stability, especially during market downturns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 12.48%, outperforming many balanced portfolios. However, it experienced a significant maximum drawdown of -30.14%, indicating vulnerability during market downturns. While past performance is not a guarantee of future results, this historical trend suggests that the portfolio has potential for high returns but also carries substantial risk. Consider strategies to mitigate drawdowns, such as diversifying into less volatile asset classes.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, shows a wide range of potential returns. The median projection indicates a 397.55% return, but the 5th percentile shows a much lower 69.28%. This highlights the uncertainty and variability in future performance. It's important to remember that simulations are based on historical data and assumptions, which may not hold true in the future. Regularly review and adjust your portfolio to align with changing market conditions and personal risk tolerance.

Asset classes Info

  • Stocks
    92%
  • Bonds
    7%
  • Cash
    1%

The portfolio's asset class allocation is heavily skewed towards stocks, with minimal exposure to bonds and cash. This can lead to higher volatility, particularly in turbulent markets. A more balanced allocation, such as increasing bond exposure, could help stabilize returns and reduce risk. Comparing this to typical balanced portfolios, which might have around 40% in bonds, suggests room for adjustment to better align with a balanced risk profile.

Sectors Info

  • Technology
    31%
  • Financials
    12%
  • Health Care
    10%
  • Telecommunications
    10%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Consumer Discretionary
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is concentrated in technology at 31.44%, followed by financial services and healthcare. This concentration can lead to increased volatility, especially if these sectors face downturns. A more diversified sector allocation could reduce risk and improve stability. Comparing this to benchmarks, which often have a more even distribution across sectors, suggests an opportunity to diversify further. Consider reallocating to underrepresented sectors to enhance diversification.

Regions Info

  • North America
    92%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

The geographic allocation is predominantly in North America, at 91.60%, with minimal exposure to other regions. This heavy concentration in one region can increase risk if the local market underperforms. Diversifying geographically can provide exposure to different economic cycles and reduce risk. Consider increasing allocations to international markets to better align with global benchmarks and reduce reliance on the US economy.

Redundant positions Info

  • Invesco QQQ Trust
    NASDAQ-100 INDEX FUND NASDAQ-100 INDEX FUND
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco QQQ Trust and the NASDAQ-100 Index Fund. High correlation means these assets tend to move in the same direction, reducing diversification benefits. During market downturns, this can amplify losses. Consider replacing one of these with an asset that has a lower correlation to the rest of the portfolio to enhance diversification and reduce risk.

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 benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. This involves adjusting asset allocations to achieve the highest possible return for a given level of risk. However, optimization should focus on current assets and their allocation, not necessarily adding new ones. Consider using tools or consulting with a financial advisor to explore optimization opportunities, ensuring alignment with your risk tolerance and investment goals.

Dividends Info

  • Invesco QQQ Trust 0.40%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 0.90%
  • Weighted yield (per year) 1.08%

The portfolio has a moderate total dividend yield of 1.08%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.7%. Dividends can provide a steady income stream and help cushion against market volatility. For investors seeking income, focusing on higher-yielding assets could enhance returns. However, it's important to balance yield with growth potential and risk. Consider reviewing the dividend strategy to ensure it aligns with your financial goals.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • CORNERSTONE MODERATELY AGGRESSIVE FUND CORNERSTONE MODERATELY AGGRESSIVE FUND 1.09%
  • NASDAQ-100 INDEX FUND NASDAQ-100 INDEX FUND 0.42%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.32%

The portfolio's Total Expense Ratio (TER) is 0.32%, which is relatively low and beneficial for long-term returns. Lower costs mean more of your investment returns stay in your pocket. However, the Cornerstone Moderately Aggressive Fund has a higher cost at 1.09%, which could be dragging down overall performance. Consider evaluating whether lower-cost alternatives could replace higher-fee assets without sacrificing performance.

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