A balanced Canadian-focused portfolio with high dividend yield and moderate geographic diversification

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is primarily composed of Canadian-focused ETFs, with a significant allocation to dividend-paying equities. The portfolio includes a mix of equity, bond, and cash assets, with equity making up the largest portion at approximately 64%. Compared to common benchmarks, this portfolio leans heavily on Canadian equities and dividend-focused funds. While the asset mix aligns with a balanced risk profile, the portfolio may benefit from greater international diversification to mitigate country-specific risks and enhance growth potential.

Growth Info

Historically, this portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 12.84%, indicating robust performance over time. However, it also experienced a maximum drawdown of -32.74%, reflecting significant volatility during market downturns. This highlights the importance of maintaining a diversified asset mix to cushion against such declines. While past performance is not indicative of future results, understanding these trends can guide future asset adjustments to balance growth and risk.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, suggests a wide range of potential returns. With a 50th percentile projection of 348.5% and a 5th percentile at 48.87%, there is considerable uncertainty in future performance. While most simulations show positive returns, it's crucial to remember that projections are not guarantees. Consider diversifying asset classes to reduce reliance on historical trends and potentially improve future outcomes.

Asset classes Info

  • Stocks
    64%
  • Bonds
    13%
  • Cash
    13%
  • US Equity
    6%

The portfolio's allocation spans four main asset classes: equity, bond, cash, and U.S. equity, with a notable emphasis on equities. This allocation is consistent with a moderate risk profile but could benefit from increased diversification into other asset classes like international equities or alternative investments. A broader asset mix could provide additional growth opportunities and risk mitigation, especially during periods of equity market volatility.

Sectors Info

  • Financials
    27%
  • Utilities
    16%
  • Energy
    13%
  • Real Estate
    11%
  • Telecommunications
    4%
  • Industrials
    4%
  • Basic Materials
    3%
  • Technology
    3%
  • Consumer Discretionary
    2%
  • Consumer Staples
    1%
  • Health Care
    1%

Sector-wise, the portfolio is heavily weighted towards Financial Services, Utilities, and Energy, which together comprise over 56% of the portfolio. This concentration could expose the portfolio to sector-specific risks, especially if these industries face downturns. To enhance stability, consider diversifying into underrepresented sectors like Technology or Consumer Defensive, which may offer different growth dynamics and resilience during economic shifts.

Regions Info

  • North America
    82%
  • Europe Developed
    2%
  • Japan
    1%

Geographically, the portfolio is predominantly focused on North America, with over 82% of assets allocated there. This limited geographic diversification may expose the portfolio to regional economic risks. Expanding exposure to other regions, such as Europe or Asia, could provide better diversification and access to growth opportunities in emerging markets. This approach could help balance regional risks and capitalize on global economic trends.

Redundant positions Info

  • BMO Canadian Dividend
    Vanguard FTSE Canadian High Dividend Yield
    High correlation

The high correlation between the BMO Canadian Dividend and Vanguard FTSE Canadian High Dividend Yield ETFs suggests limited diversification benefits. Highly correlated assets tend to move together, which may not provide the desired risk mitigation during market downturns. Consider replacing one with a less correlated asset to enhance diversification and potentially improve the portfolio's risk-return profile.

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 could be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio based on current assets. By adjusting the allocation between existing assets, the portfolio's expected return could potentially increase to 22.80% with a risk level of 13.27%. This optimization focuses on maximizing efficiency, but it’s important to consider other factors like diversification and personal investment goals.

Dividends Info

  • Purpose High Interest Savings ETF 24.00%
  • Vanguard FTSE Canadian High Dividend Yield 2.20%
  • iShares Core Equity Portfolio 0.90%
  • iShares U.S. High Yield Bond Index ETF (CAD-Hedged) 2.90%
  • iShares S&P/TSX Capped REIT Index ETF 2.60%
  • BMO Canadian Dividend 1.90%
  • Weighted yield (per year) 5.22%

The portfolio boasts a healthy overall dividend yield of 5.22%, with significant contributions from the Purpose High Interest Savings ETF and other dividend-focused funds. This yield can provide a steady income stream, appealing to income-focused investors. However, relying too heavily on high-yield assets can sometimes lead to increased risk. Balancing dividend yield with growth-oriented investments could ensure sustained portfolio growth and income.

Ongoing product costs Info

  • BMO Canadian Dividend 0.35%
  • Weighted costs total (per year) 0.09%

The portfolio's costs are relatively low, with the BMO Canadian Dividend ETF having a Total Expense Ratio (TER) of 0.35%. Lower costs support better long-term performance by minimizing the drag on returns. However, it’s still worth exploring if there are even lower-cost options available that align with your investment strategy. Regularly reviewing and optimizing costs can contribute to improved net returns over time.

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