Growth-Focused Canadian Portfolio with Strong Historical Performance and Moderate Diversification
Report created on Dec 4, 2024Risk profile
5/7
Diversification profile
3/5
Positions
-
VF Vanguard S&P 500 Index ETF
VFV - CA92205Y1051 50.00% -
QQ Invesco NASDAQ 100 Index ETF
QQC-F - CA46090T1003 25.00% -
VE Vanguard All-Equity ETF Portfolio
VEQT - CA92201C1077 25.00%
The portfolio is composed of three main ETFs: Vanguard S&P 500 Index ETF, Invesco NASDAQ 100 Index ETF, and Vanguard All-Equity ETF Portfolio. This composition shows a strong inclination towards equities, particularly U.S. equities, with a 50% allocation to the S&P 500 and 25% each to NASDAQ 100 and All-Equity ETFs. This setup indicates a growth-oriented strategy, aiming for capital appreciation through exposure to large-cap U.S. stocks and a broader equity market. To enhance diversification, consider including more asset classes such as bonds or international equities to balance the risk and potential returns.
Growth
Historically, the portfolio has performed well with a CAGR of 17.59%, which is impressive. However, the max drawdown of -28.45% highlights the inherent risks associated with a growth-focused portfolio. This performance suggests that the portfolio has benefited from the strong performance of U.S. equities over the past few years. While past performance is not indicative of future results, it provides a benchmark to assess the portfolio's resilience during market downturns. To mitigate potential future drawdowns, consider introducing more defensive assets or strategies.
Projection
Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation, which uses random sampling to predict outcomes, shows a 5th percentile end value of 171.49% and a 50th percentile of 856.65%. With 999 simulations showing positive returns, the projected annualized return is 19.04%. This suggests a high potential for future growth, but also underscores the portfolio's sensitivity to market volatility. To align with personal risk tolerance, consider adjusting the asset allocation to ensure comfort with potential fluctuations.
Asset classes
- US Equity 61%
- Stocks 8%
The portfolio's asset classes are predominantly U.S. Equity at 61.02%, with Equity and Cash making up the remaining portions. This heavy allocation towards equities aligns with a growth-oriented investment strategy, aiming for capital appreciation. The limited exposure to cash and other asset classes indicates a focus on maximizing returns rather than preserving capital. To reduce volatility and enhance stability, consider incorporating a mix of fixed-income securities or other asset classes that may provide diversification benefits.
Sectors
- Technology 34%
- Financials 12%
- Consumer Discretionary 11%
- Telecommunications 10%
- Health Care 9%
- Industrials 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 2%
- Real Estate 2%
Sector allocation is heavily weighted towards Technology at 33.90%, followed by Financial Services and Consumer Cyclicals. This concentration in Technology suggests a reliance on the sector's continued growth, which can be both a strength and a vulnerability. The portfolio's exposure to various sectors provides some diversification, but the high concentration in a few sectors may increase risk. To achieve a more balanced sector allocation, consider diversifying into sectors that may perform differently under varying economic conditions.
Regions
- North America 69%
- Europe Developed 3%
- Asia Emerging 1%
- Japan 1%
- Asia Developed 1%
Geographically, the portfolio is largely focused on North America, with 68.71% allocation. This concentration in North American equities indicates a strong reliance on the region's economic performance. While this exposure has historically provided robust returns, it may also expose the portfolio to regional risks. Limited exposure to other regions such as Europe and Asia suggests an opportunity to diversify geographically, potentially reducing risk and capturing growth opportunities in emerging markets. Consider increasing international exposure to enhance diversification.
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 in diversification. Moving along the efficient frontier could enhance returns or reduce risk. For a riskier portfolio, increase exposure to equities or high-growth sectors. To adopt a more conservative approach, consider incorporating fixed-income securities or diversifying into uncorrelated asset classes. Prioritize achieving a balance that aligns with risk tolerance and financial objectives. Before making changes, evaluate the impact on overall portfolio performance and ensure it supports long-term investment goals.
Dividends
- Invesco NASDAQ 100 Index ETF 0.40%
- Vanguard All-Equity ETF Portfolio 1.50%
- Vanguard S&P 500 Index ETF 0.70%
- Weighted yield (per year) 0.82%
The portfolio's dividend yield is relatively low at 0.82%, reflecting its growth-oriented nature. With a focus on capital appreciation, the portfolio prioritizes potential market gains over income generation. The individual ETFs contribute varying yields, with Vanguard All-Equity ETF Portfolio offering the highest at 1.5%. For investors seeking income, this yield may not be sufficient. To enhance income potential, consider incorporating higher-yielding assets or dividend-focused strategies that align with the overall growth objective while providing additional cash flow.
Ongoing product costs
- Invesco NASDAQ 100 Index ETF 0.20%
- Weighted costs total (per year) 0.05%
Portfolio costs are relatively low, with the Invesco NASDAQ 100 Index ETF at 0.2% and a total TER of 0.05%. These low costs are beneficial for long-term growth, as they minimize the drag on overall returns. Keeping expenses in check is crucial for maximizing net returns, especially in a growth-focused portfolio. To maintain cost efficiency, regularly review expense ratios and consider low-cost alternatives if necessary. Staying mindful of costs ensures that more of the portfolio's gains are retained, contributing to overall investment success.
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