A balanced portfolio with significant tech exposure and moderate bond allocation

Report created on Jan 19, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is composed of four ETFs, with a significant 40% allocation to the Invesco NASDAQ 100 ETF, 30% to the iShares 20+ Year Treasury Bond ETF, 15% to the SPDR® S&P 600 Small Cap Value ETF, and 15% to the SPDR S&P 500 ETF Trust. This structure leans heavily towards equities, particularly technology, while maintaining a substantial bond component for stability. Compared to typical balanced portfolios, this one has a higher equity tilt, which could lead to more volatility but also offers higher growth potential. Consider diversifying further to include more asset classes, such as international equities or commodities, to enhance risk management.

Growth Info

Historically, the portfolio has delivered a CAGR of 8.26%, which is a strong performance, especially given its balanced nature. However, it experienced a maximum drawdown of -29.54%, indicating significant volatility during market downturns. The concentration in tech-heavy ETFs like the NASDAQ 100 can explain this volatility. When compared to a standard balanced benchmark, which typically experiences lower drawdowns, this portfolio's performance is commendable but could benefit from increased diversification. Consider allocating more to defensive sectors or bonds to mitigate future drawdowns.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median expected growth of 182.25% and a 67th percentile outcome of 307.79%. The simulations reveal that 917 out of 1,000 scenarios resulted in positive returns, suggesting a favorable outlook. However, the reliance on historical data means these projections aren't guarantees. The portfolio's tech bias may lead to high returns if the sector continues to perform well, but it also increases risk. Regularly review and adjust allocations to align with changing market conditions and personal risk tolerance.

Asset classes Info

  • Stocks
    70%
  • Bonds
    30%

The portfolio is primarily allocated to stocks (69.91%) and bonds (29.85%), with minimal cash holdings. This asset class distribution suggests a focus on growth with a moderate level of risk, typical for a balanced investor. Compared to benchmarks, the stock allocation is relatively high, which might increase potential returns but also volatility. To improve diversification, consider adding other asset classes like real estate or commodities, which can provide stability and reduce correlation with traditional stock and bond investments.

Sectors Info

  • Technology
    28%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Financials
    5%
  • Industrials
    5%
  • Health Care
    5%
  • Consumer Staples
    4%
  • Real Estate
    2%
  • Energy
    1%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio's sector allocation is heavily weighted towards technology (27.60%), followed by consumer cyclicals (9.92%) and communication services (7.93%). This tech-heavy focus aligns with growth strategies but could lead to higher volatility, especially in rising interest rate environments. Compared to a typical balanced portfolio, which may have more even sector distribution, this concentration could pose risks if tech underperforms. To balance risk, consider increasing exposure to more defensive sectors like healthcare or utilities, which can provide stability during market fluctuations.

Regions Info

  • North America
    69%
  • Europe Developed
    1%

Geographically, the portfolio is concentrated in North America (68.91%), with minimal exposure to other regions. This concentration might limit diversification benefits and increase vulnerability to regional economic downturns. Compared to global benchmarks, which often include more international exposure, this portfolio could benefit from diversifying into European or emerging markets. Expanding geographic exposure can help mitigate risks associated with regional economic cycles and potentially capture growth opportunities in other parts of the world.

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 suggests the best possible risk-return ratio based on current assets. While the current allocation provides a decent balance between risk and return, exploring different weightings could further enhance efficiency. This process involves adjusting allocations to achieve higher returns for the same level of risk or reducing risk without sacrificing returns. Regularly reassessing the portfolio's position on the Efficient Frontier can help ensure it remains aligned with personal investment goals and market conditions.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • SPDR® S&P 600 Small Cap Value ETF 1.50%
  • SPDR S&P 500 ETF Trust 0.90%
  • iShares 20+ Year Treasury Bond ETF 4.30%
  • Weighted yield (per year) 1.89%

The portfolio's dividend yield stands at 1.89%, with the iShares 20+ Year Treasury Bond ETF contributing the highest yield at 4.3%. Dividends can provide a steady income stream and help cushion against market volatility. While the yield is modest, it aligns with the balanced nature of the portfolio. However, increasing exposure to higher-dividend-paying stocks or funds could enhance income generation. This approach can be particularly beneficial for investors seeking regular income alongside capital appreciation.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • SPDR® S&P 600 Small Cap Value ETF 0.15%
  • SPDR S&P 500 ETF Trust 0.10%
  • iShares 20+ Year Treasury Bond ETF 0.15%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is 0.14%, which is impressively low and supports better long-term performance by minimizing costs. Low fees are crucial for maximizing net returns, especially in a balanced portfolio where costs can significantly impact overall growth. Compared to industry averages, this TER is competitive and reflects efficient cost management. Continue to monitor fees and consider lower-cost alternatives if available, but the current cost structure is well-aligned with best practices.

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