A balanced portfolio with strong US focus and notable tech sector concentration

Report created on Jan 5, 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 US equity ETFs, with a significant 83.9% combined allocation in Vanguard Total Stock Market Index Fund and Vanguard S&P 500 ETF. The remaining allocation is spread across tech-focused and international ETFs. This composition is typical for investors seeking exposure to the broad US market. While this provides a strong foundation in US equities, it limits diversification, particularly in terms of asset classes and geographic regions. To broaden exposure, consider incorporating other asset classes such as bonds or real estate investment trusts (REITs), which can help balance risk and improve overall stability.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 15.15% and a maximum drawdown of -26.87%. The performance surpasses many standard benchmarks, indicating robust growth potential. However, the significant drawdown highlights vulnerability during market downturns. It's important to remember that past performance doesn't guarantee future results, and the market can be unpredictable. To mitigate potential risks, consider diversifying further to reduce reliance on high-performing yet volatile sectors. This can help cushion against future market fluctuations and maintain steady portfolio growth.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns for this portfolio. The median projection is a 199.1% increase, but outcomes vary significantly, with the 5th percentile showing a potential loss of 44.51%. While the annualized return across simulations is 12.33%, it's crucial to note that these projections are not guarantees. Market conditions can change, affecting future performance. To prepare for various scenarios, consider stress-testing the portfolio under different market conditions and adjusting allocations to improve resilience against adverse outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in equities, with 99.81% of assets in stocks. This heavy equity concentration can lead to high volatility, especially during market downturns. While equities offer growth potential, they also carry risks, particularly for investors nearing retirement or those with lower risk tolerance. To enhance diversification, consider adding fixed-income securities, which can provide stability and income, helping to offset equity market fluctuations. This balanced approach can improve the portfolio's risk-return profile, offering a smoother investment journey over the long term.

Sectors Info

  • Technology
    36%
  • Financials
    12%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Utilities
    3%
  • Energy
    3%
  • Real Estate
    2%
  • Basic Materials
    2%

The portfolio is notably concentrated in technology, which comprises 35.89% of the holdings. While tech stocks have driven significant growth, they are also susceptible to high volatility, especially during interest rate hikes. Other sectors like financial services and healthcare offer additional diversification but are underrepresented. To balance sector exposure, consider reallocating some tech investments to sectors with lower representation, such as consumer defensive or utilities, which can provide stability during economic downturns. This approach can help mitigate sector-specific risks and enhance overall portfolio resilience.

Regions Info

  • North America
    96%
  • Europe Developed
    2%
  • Asia Developed
    1%
  • Asia Emerging
    1%

With 95.65% of assets allocated to North America, the portfolio has limited geographic diversification. This heavy concentration can expose the portfolio to regional economic risks and currency fluctuations. Expanding exposure to other regions, such as Europe or Asia, can offer diversification benefits and tap into growth opportunities in emerging markets. A more geographically balanced portfolio can reduce reliance on the US market and enhance resilience against regional downturns. Consider gradually increasing allocations to international ETFs to achieve a more balanced geographic spread.

Redundant positions Info

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

The portfolio features highly correlated assets, particularly the Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets often move in tandem, limiting diversification benefits. During market downturns, this can result in amplified losses. To enhance diversification, consider reducing exposure to one of these ETFs and reallocating to less correlated assets. This adjustment can help smooth out returns and reduce overall portfolio risk, providing a more balanced investment experience.

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's current asset allocation could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. However, before optimization, focus on reducing exposure to overlapping, highly correlated assets that don't contribute to diversification. By reallocating to less correlated assets, you can improve the portfolio's efficiency. This approach doesn't necessarily mean adding new assets but adjusting current allocations to achieve a more balanced risk-return profile. Such optimization can enhance the portfolio's resilience and potential for long-term growth.

Dividends Info

  • iShares Global Clean Energy ETF 0.80%
  • First Trust NASDAQ® Clean Edge® Green Energy Index Fund 0.70%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.18%

The portfolio's overall dividend yield is 1.18%, with the highest yield coming from the Vanguard Total International Stock Index Fund at 3.4%. While dividends provide a steady income stream, the portfolio's focus on growth-oriented ETFs limits dividend income. For investors seeking more income, consider increasing allocations to dividend-focused funds, which can offer higher yields. Balancing growth and income can enhance total returns and provide a cushion during market volatility. However, ensure that any changes align with long-term investment goals and risk tolerance.

Ongoing product costs Info

  • iShares Global Clean Energy ETF 0.41%
  • First Trust NASDAQ® Clean Edge® Green Energy Index Fund 0.58%
  • Invesco NASDAQ 100 ETF 0.15%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, thanks to the inclusion of low-cost Vanguard ETFs. This cost efficiency supports better long-term performance by minimizing fees that can erode returns. However, two ETFs—iShares Global Clean Energy and First Trust NASDAQ Clean Edge Green Energy—carry higher fees of 0.41% and 0.58%, respectively. Consider evaluating whether lower-cost alternatives could achieve similar exposure. Reducing these costs can further enhance net returns, supporting the portfolio's overall growth and efficiency.

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