A tech-heavy balanced portfolio with strong historical returns but limited geographic diversity

Report created on Jan 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs, with a significant 47% allocation to the Vanguard S&P 500 ETF. The Schwab U.S. Dividend Equity ETF and Vanguard Information Technology Index Fund ETF Shares make up 31% and 22%, respectively. Such a composition provides exposure primarily to large-cap U.S. equities. Compared to typical balanced portfolios, this one shows a low diversification score, indicating a concentration in fewer asset types. To enhance diversification, consider incorporating other asset classes like bonds or international equities, which can provide additional stability and growth potential.

Growth Info

Historically, this portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 15.17%, indicating strong past performance. However, it's important to note that the maximum drawdown was -33.01%, reflecting significant potential losses during market downturns. Compared to benchmarks, this performance suggests a higher volatility level. While past performance can provide insights, it doesn't guarantee future results. Consider strategies to manage risk, such as diversifying across more asset classes, to mitigate the impact of future market declines.

Projection Info

Using Monte Carlo simulations, which model potential future outcomes based on historical data, this portfolio shows promising forward projections. With a 50th percentile return of 629.16% and an annualized return of 17.45%, the outlook is optimistic. However, simulations are hypothetical and subject to the limitations of past data. They should be viewed as one of many tools for decision-making. To prepare for various scenarios, regularly review and adjust the portfolio to align with evolving market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily skewed towards stocks, with 99.57% in equities and a negligible 0.43% in cash. This allocation can lead to higher growth potential but also increases exposure to market volatility. Compared to balanced benchmarks, which often include bonds and other asset classes, this portfolio has limited diversification. Adding fixed-income securities or alternative investments may help balance risk and return, offering a cushion during market downturns while providing steady income.

Sectors Info

  • Technology
    41%
  • Financials
    12%
  • Health Care
    10%
  • Consumer Discretionary
    8%
  • Industrials
    7%
  • Consumer Staples
    7%
  • Telecommunications
    6%
  • Energy
    5%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is notably concentrated in the technology sector, making up 40.66% of the allocation. Other sectors like financial services, healthcare, and consumer cyclicals are present but less dominant. This tech-heavy focus can lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. To mitigate sector-specific risks, consider diversifying into underrepresented sectors. This can help balance potential downturns in tech with stability from more defensive sectors like utilities or consumer staples.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.32% exposure. This lack of geographic diversification could limit opportunities and increase vulnerability to regional economic downturns. In comparison, a globally diversified portfolio might include more exposure to Europe, Asia, and emerging markets. Expanding geographic diversification can offer access to different growth opportunities and reduce the impact of localized economic or political events on the portfolio.

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 current portfolio may benefit from optimization using the Efficient Frontier, a concept that aims to achieve the best possible risk-return trade-off. By adjusting the allocation among existing assets, the portfolio could potentially improve its efficiency. This process doesn't necessarily mean adding new assets but rather rebalancing to find the optimal mix. Regularly review the portfolio's performance and consider rebalancing to maintain alignment with the desired risk-return profile.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.89%

The portfolio's dividend yield stands at 1.89%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.7%. Dividends can provide a steady income stream and are particularly valuable for income-focused investors. However, the overall yield is modest, suggesting a primary focus on growth rather than income. If generating income is a priority, consider increasing exposure to high-dividend-paying assets or funds. Balancing growth and income can offer a more comprehensive strategy tailored to diverse financial goals.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.05%

With a total expense ratio (TER) of 0.05%, this portfolio is cost-efficient, aligning well with best practices for minimizing investment costs. Low fees can significantly enhance long-term returns by reducing the drag on performance. This cost structure is competitive compared to industry averages, making it a strength of the portfolio. Continue monitoring and managing costs, ensuring that any new investments also offer low expense ratios to maintain this advantage.

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