Balanced Portfolio with Strong Tech Focus and High Correlation in Stock Assets

Report created on Aug 16, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of four ETFs, with a significant 50% allocation to the Invesco NASDAQ 100 ETF. This ETF is heavily tech-focused, which is evident in the sector allocation. The rest of the portfolio is diversified across the Vanguard Total Stock Market Index Fund ETF Shares, the Vanguard Total International Stock Index Fund ETF Shares, and the Schwab U.S. Dividend Equity ETF. This composition provides a broad exposure to different markets, yet it leans heavily towards U.S. equities, particularly in the tech sector, which could influence the overall risk and return profile.

Growth Info

Historically, the portfolio has performed well with a CAGR of 14.08%, though it experienced a maximum drawdown of -29.35%. This indicates that while the portfolio has the potential for strong growth, it can also be subject to significant volatility. The days that make up 90% of returns being only 17 suggests that the portfolio's performance is driven by a few key periods, likely influenced by the tech-heavy allocation. This volatility should be considered when evaluating the portfolio's suitability for long-term investment goals.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a promising forward projection. Assuming a hypothetical initial investment, the 50th percentile projects a 430.27% return, while the 67th percentile suggests a potential 637.65% gain. The annualized return across simulations is 14.29%, indicating robust potential growth. Monte Carlo simulations provide a range of possible outcomes by accounting for variability and uncertainty in market conditions, offering a probabilistic approach to future performance. This can help in understanding the range of potential returns and risks associated with the current portfolio allocation.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with 99.63% of assets in this class. This high concentration in equities suggests a focus on growth, but it also introduces significant risk, particularly during market downturns. A more balanced allocation might include bonds or other fixed-income assets to provide a buffer against volatility. While this stock-heavy strategy can yield higher returns, it requires a tolerance for risk and an understanding of the potential for significant fluctuations in value.

Sectors Info

  • Technology
    35%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    9%
  • Health Care
    8%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

With a 35.35% allocation to technology, the portfolio is heavily weighted towards this sector, followed by consumer cyclicals and communication services. This concentration in tech can lead to higher returns during periods of technological innovation and growth but also increases vulnerability to sector-specific downturns. A more diversified sector allocation could help mitigate these risks by spreading exposure across a broader range of industries. Balancing sector allocations can enhance stability and reduce the impact of underperformance in any single sector.

Regions Info

  • North America
    80%
  • Europe Developed
    9%
  • Asia Emerging
    4%
  • Japan
    3%
  • Asia
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly North American, with 80.19% of assets allocated to this region. While this provides familiarity and stability, it limits exposure to international markets, which could offer growth opportunities and diversification benefits. Expanding geographic allocation to include more emerging markets or other developed regions could enhance diversification and reduce region-specific risks. A more globally diversified portfolio can better withstand localized economic downturns and capitalize on international growth trends.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    High correlation

There is a high correlation between the Vanguard Total Stock Market Index Fund ETF Shares and the Invesco NASDAQ 100 ETF. This means these assets tend to move in the same direction, which could amplify both gains and losses. High correlation within a portfolio reduces diversification benefits and increases overall risk. To improve diversification, consider including assets with lower correlations, which can help smooth out returns and reduce the portfolio's sensitivity to market swings. A more diversified portfolio can better withstand volatility and provide more consistent performance.

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.

Given the high correlation between some assets, optimizing the portfolio isn't recommended at this stage. Instead, focus on enhancing diversification to reduce risk. By shifting along the efficient frontier, one can move towards a riskier or more conservative portfolio. For a riskier approach, increase equity exposure, while for a conservative stance, consider adding bonds or other fixed-income assets. Before optimizing, ensure a well-diversified allocation to minimize correlated risks. This strategic adjustment can enhance portfolio resilience and align with desired risk levels.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.50%

The portfolio's overall dividend yield stands at 1.5%, with the Schwab U.S. Dividend Equity ETF contributing a notable 3.4%. While dividends are not the primary focus of this portfolio, they provide a modest income stream that can be reinvested or used for cash flow. For investors seeking income, a higher allocation to dividend-focused assets could be considered. However, the current yield is a reasonable supplement to the portfolio's growth-oriented strategy, offering some degree of income without sacrificing the potential for capital appreciation.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • 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%, which is quite low and favorable. This means the costs associated with managing the portfolio are minimal, allowing more of the returns to be retained by the investor. Keeping investment costs low is crucial for maximizing net returns over time. While the current TER is already efficient, regularly reviewing and ensuring low costs can contribute significantly to long-term performance. Cost efficiency is a key factor in successful investing, as high fees can erode returns, especially over extended periods.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey