A balanced portfolio with strong US focus and tech-heavy sector exposure

Report created on Dec 19, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists of three ETFs: the Vanguard S&P 500 ETF (40%), iShares MSCI ACWI ETF (30%), and Invesco NASDAQ 100 ETF (30%). It's heavily weighted towards equities, which aligns with common balanced portfolios that typically have a significant stock allocation. However, the concentration in US equities and technology sectors is notable. A more diversified portfolio might include bonds or other asset classes to reduce risk. Consider adding fixed-income securities or other asset classes to enhance diversification and potentially lower volatility.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 14.54%. This performance is impressive compared to typical market benchmarks, suggesting strong growth potential. However, the maximum drawdown of -28.12% indicates significant volatility. While past performance is not a guarantee of future results, it highlights the portfolio's ability to generate returns during favorable market conditions. To mitigate potential losses during downturns, consider incorporating more defensive assets or strategies to balance risk and reward.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests an annualized return of 15.45%. With 997 out of 1,000 simulations showing positive returns, it indicates a high probability of success. However, the 5th percentile projection of 98.15% growth shows that there are still potential risks. Remember, these simulations are based on historical data and assumptions that may not hold in the future. Regularly reviewing and adjusting the portfolio in response to changing market conditions can help manage these uncertainties.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in equities, with 99.82% in stocks. While stocks offer growth potential, they also introduce volatility. A more diversified allocation across asset classes could mitigate this risk. Common benchmarks often include a mix of stocks, bonds, and other assets to balance growth and stability. Consider introducing fixed-income assets or alternative investments to reduce overall risk and smooth out returns. This might also help align the portfolio more closely with a balanced risk profile.

Sectors Info

  • Technology
    37%
  • Consumer Discretionary
    12%
  • Telecommunications
    11%
  • Financials
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The portfolio is heavily concentrated in the technology sector, which accounts for 36.55% of the total allocation. While this sector has driven significant growth, it also comes with higher volatility, especially during market corrections or interest rate hikes. Compared to benchmarks, this concentration is high and could pose risks if the sector underperforms. To achieve a more balanced sector allocation, consider reducing exposure to technology and increasing investments in underrepresented sectors like real estate or utilities, which may offer stability.

Regions Info

  • North America
    90%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly exposed to North America, with 89.86% of assets allocated there. This concentration limits the benefits of global diversification and exposes the portfolio to regional risks. Compared to global benchmarks, this is a significant overexposure. Consider increasing allocations to other regions, such as Europe or Asia, to diversify geopolitical and economic risks. Expanding geographic exposure can help capture growth opportunities in emerging markets and reduce dependence on the US economy.

Redundant positions Info

  • iShares MSCI ACWI ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes highly correlated assets, particularly between the iShares MSCI ACWI ETF and the Vanguard S&P 500 ETF. High correlation means these assets tend to move in the same direction, which may limit diversification benefits. In market downturns, this could lead to amplified losses. To enhance risk management, consider replacing one of these ETFs with assets that have lower correlation to the rest of the portfolio. This change can improve diversification and potentially stabilize returns across different market conditions.

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 benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the portfolio's high correlation between certain assets suggests room for improvement. By adjusting the allocation among existing assets, it's possible to achieve a more efficient portfolio that maximizes returns for a given level of risk. This process doesn't necessarily mean adding new assets but rather reevaluating the weights of current holdings to enhance the portfolio's overall efficiency.

Dividends Info

  • iShares MSCI ACWI ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.50%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.15%

The portfolio's overall dividend yield is 1.15%, with contributions from the iShares MSCI ACWI ETF, Invesco NASDAQ 100 ETF, and Vanguard S&P 500 ETF. This yield is relatively modest but can provide a steady income stream. For investors focused on income, higher-yielding assets might be more attractive. However, for growth-oriented portfolios, dividends can be reinvested to enhance compounding returns. If income is a priority, consider increasing exposure to dividend-focused ETFs or stocks to boost yield without sacrificing growth potential.

Ongoing product costs Info

  • iShares MSCI ACWI ETF 0.32%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, which is impressively low and supports better long-term performance by minimizing costs. Low fees are crucial as they can significantly impact net returns over time. Compared to many actively managed funds, this cost structure is advantageous. Maintaining low costs should remain a priority, but it's also important to ensure that the portfolio's composition aligns with investment goals. Regularly review and compare ETF fees to ensure they remain competitive and continue to support the portfolio's objectives.

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