A balanced portfolio with strong tech presence and high North American exposure

Report created on Jan 24, 2025

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 equities, with a 100% allocation in stocks. Major holdings include large positions in Berkshire Hathaway and Vanguard ETFs, each making up 20% of the portfolio. This composition leans towards a balanced profile, offering diversification across sectors and companies. However, the lack of bonds or alternative assets could mean less stability during market downturns. Including a wider range of asset classes, like fixed income or real estate, could enhance diversification. A diversified asset mix can help mitigate risks associated with market volatility and improve long-term stability.

Growth Info

The historical performance of the portfolio has been impressive, with a Compound Annual Growth Rate (CAGR) of 22.04%. However, it also experienced a maximum drawdown of -23.34%, indicating significant volatility. The portfolio's returns are concentrated, with just 34 days accounting for 90% of returns. This suggests a reliance on high-growth periods, which may not be sustainable. To manage potential downturns, consider rebalancing the portfolio to include more stable investments. It's important to remember that past performance does not guarantee future results, and diversification can help smooth out returns over time.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 35.73%. The 5th percentile projects a 305.8% return, while the 67th percentile suggests a 5,769.6% return. These simulations use historical data to estimate potential future performance, but they are not foolproof. Market conditions can change unpredictably, and these projections should be viewed as one of many tools in decision-making. To prepare for various scenarios, consider maintaining a diversified portfolio that can adapt to different economic conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is concentrated entirely in stocks, with no allocation to other asset classes like bonds or commodities. This can lead to higher volatility, as equities tend to be more sensitive to market fluctuations. Diversification across asset classes can help manage risk and provide more stable returns. Consider introducing bonds or other fixed-income securities to balance the portfolio. This can provide a buffer during market downturns and help achieve a more consistent performance over time, aligning with a balanced investment strategy.

Sectors Info

  • Technology
    30%
  • Financials
    25%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Energy
    6%
  • Health Care
    6%
  • Consumer Staples
    3%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

The portfolio's sector allocation is tech-heavy, with 30% in technology and 25% in financial services. This concentration can lead to higher volatility, especially during market shifts affecting these sectors. While tech and financials have driven recent gains, they can also experience sharp declines. To mitigate sector-specific risks, consider diversifying into underrepresented sectors like consumer defensive or healthcare. This can provide stability and reduce reliance on the performance of a few sectors. A diversified sector allocation aligns with a balanced investment approach.

Regions Info

  • North America
    97%
  • Asia Emerging
    2%

Geographically, the portfolio is overwhelmingly focused on North America, with 97% exposure. This concentration can limit diversification benefits and increase vulnerability to regional economic downturns. Consider diversifying into other regions, such as emerging markets or developed Europe, to reduce risk and capture growth opportunities. A more globally diversified portfolio can help balance regional risks and take advantage of different economic cycles. While North American markets have performed well, diversification across geographies can provide a hedge against localized issues.

Market capitalization Info

  • Mega-cap
    61%
  • Large-cap
    24%
  • Mid-cap
    12%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio is heavily weighted towards mega-cap stocks, which make up 61% of the allocation. While these large companies offer stability and liquidity, they can also limit growth potential compared to smaller firms. Including a mix of small and mid-cap stocks can enhance growth opportunities and improve diversification. Smaller companies often have higher growth potential, albeit with increased risk. Balancing market capitalization exposure can help achieve a blend of stability and growth, aligning with a balanced investment strategy.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes highly correlated assets, particularly the Vanguard ETFs, which may limit diversification benefits. Correlation measures how assets move together; highly correlated assets can lead to increased risk during market downturns. To enhance diversification, consider reducing exposure to overlapping assets and introducing investments with low correlation. This can help manage risk and improve the portfolio's resilience to market volatility. A well-diversified portfolio can better withstand economic shifts and provide more consistent returns.

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 can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. This involves rebalancing to achieve an ideal mix of risk and return. However, optimization should consider diversification, not just risk and return metrics. By adjusting asset weights, the portfolio can potentially enhance returns without increasing risk. It's important to note that optimization is based on historical data and current holdings, so regular reviews are necessary to adapt to changing market conditions.

Dividends Info

  • Broadcom Inc 0.90%
  • Alphabet Inc Class A 0.30%
  • Home Depot Inc 2.20%
  • Eli Lilly and Company 0.70%
  • Lowe's Companies Inc 1.30%
  • Meta Platforms Inc. 0.30%
  • Microsoft Corporation 0.70%
  • Oracle Corporation 0.90%
  • Invesco Aerospace & Defense ETF 0.30%
  • Invesco NASDAQ 100 ETF 0.60%
  • Taiwan Semiconductor Manufacturing 1.00%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Energy Select Sector SPDR® Fund 3.10%
  • Weighted yield (per year) 0.83%

The portfolio's dividend yield is modest at 0.83%, with contributions from various holdings like Broadcom and Home Depot. Dividends can provide a steady income stream and help cushion against market volatility. For investors seeking income, consider increasing exposure to higher-yielding stocks or dividend-focused funds. However, it's important to balance yield with growth potential, as high dividends can sometimes indicate slower growth. A diversified approach to dividends can enhance income while maintaining growth opportunities.

Ongoing product costs Info

  • Invesco Aerospace & Defense ETF 0.58%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Energy Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is low at 0.06%, which is beneficial for long-term performance. Lower costs mean more of your investment returns are retained, compounding over time. The use of low-cost ETFs, like those from Vanguard, helps keep expenses in check. However, the Invesco Aerospace & Defense ETF has a higher cost at 0.58%, which could be reviewed. Consider periodically evaluating your portfolio's cost structure to ensure it remains efficient. Keeping expenses low is a key component of maximizing investment returns.

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