A secure portfolio with high cash allocation and modest equity exposure

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Secure Investors

This portfolio suits an investor with a very low risk tolerance and a focus on capital preservation. It emphasizes security and liquidity, making it ideal for those seeking stable returns with minimal volatility. The investment horizon is likely short to medium term, prioritizing income over growth. This setup is well-suited for individuals nearing retirement or those who prioritize protecting their principal investment.

Positions

  • CI High Interest Savings ETF
    CSAV - CA12558L1040
    28.97%
  • US High Interest Savings Account ETF
    HISU-U - CA91737A1066
    28.97%
  • Purpose US Cash Fund
    PSU-U - CA74642V1004
    14.28%
  • Vanguard FTSE Canadian High Dividend Yield
    VDY - CA92203Q1046
    7.10%
  • BMO Canadian Dividend
    ZDV - CA05590R1055
    6.84%
  • Purpose High Interest Savings ETF
    PSA - CA74640A1084
    3.98%
  • iShares U.S. High Yield Bond Index ETF (CAD-Hedged)
    XHY - CA46430D1042
    3.41%
  • iShares Core Equity Portfolio
    XEQT - CA46436D1087
    3.38%
  • iShares S&P/TSX Capped REIT Index ETF
    XRE - CA46431D1033
    3.07%

This portfolio is heavily weighted towards cash and cash equivalent ETFs, with over 60% of assets in high-interest savings accounts and cash funds. The remaining allocation is spread across equities and bonds. Compared to a typical balanced portfolio, this composition is conservative, prioritizing security and liquidity over growth. While this setup minimizes risk, it may limit potential returns. A more diversified asset allocation could enhance growth prospects without significantly increasing risk.

Growth Info

Historically, this portfolio has achieved a compound annual growth rate (CAGR) of 6.33%, with a maximum drawdown of only -1.79%. This performance indicates resilience during market downturns, aligning with the portfolio's secure risk classification. However, the limited number of days contributing to 90% of returns suggests potential volatility. While past performance is informative, it's essential to remember that it doesn't guarantee future results, and diversification could help stabilize returns further.

Projection Info

Using Monte Carlo simulations, which model potential future outcomes based on historical data, this portfolio shows a median projected growth of 282.15%. All simulations resulted in positive returns, suggesting a favorable outlook. However, the expected return of 10.26% annually may not fully materialize due to market dynamics and economic changes. It's crucial to consider that these projections are based on historical trends that might not reflect future conditions, highlighting the need for periodic portfolio reviews.

Asset classes Info

  • Cash
    33%
  • Stocks
    18%
  • Bonds
    4%
  • US Equity
    2%

The portfolio's asset classes are primarily concentrated in cash (nearly 33%), followed by equities and a small bond allocation. This heavy cash focus provides stability but limits growth potential compared to a more diversified asset mix. Common benchmarks often suggest a higher equity proportion for balanced growth. Incorporating more equities or bonds could enhance returns while maintaining a secure risk profile, offering better alignment with conventional diversification practices.

Sectors Info

  • Financials
    7%
  • Utilities
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Telecommunications
    1%
  • Industrials
    1%
  • Basic Materials
    1%
  • Technology
    1%
  • Consumer Discretionary
    1%
  • Consumer Staples
    0%
  • Health Care
    0%

Sector allocation is modestly diversified, with financial services, utilities, energy, and real estate leading the way. This spread offers a degree of balance, but the presence of multiple sectors with minimal representation suggests limited sectoral diversification. Aligning sector weights with broader market benchmarks could reduce sector-specific risks and improve overall portfolio resilience, particularly in volatile markets. Expanding exposure to underrepresented sectors may enhance diversification.

Regions Info

  • North America
    23%
  • Europe Developed
    0%
  • Japan
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Australasia
    0%
  • Latin America
    0%
  • Africa/Middle East
    0%
  • Europe Emerging
    0%

Geographically, the portfolio is concentrated in North America, with minimal exposure to other regions. This focus aligns with the client's Canadian base but limits international diversification, which could mitigate regional risks. Common benchmarks often allocate more globally for better risk distribution. Increasing exposure to developed and emerging markets could provide opportunities for growth and enhance the portfolio's resilience to local economic fluctuations.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly between the Vanguard FTSE Canadian High Dividend Yield and BMO Canadian Dividend ETFs. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could amplify losses. To enhance diversification, consider replacing one of these ETFs with assets that have lower correlation to the rest of the portfolio, improving risk management and potential returns.

Dividends Info

  • CI High Interest Savings ETF 2.80%
  • US High Interest Savings Account ETF 2.60%
  • Purpose High Interest Savings ETF 24.00%
  • Purpose US Cash Fund 2.50%
  • 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 2.70%
  • BMO Canadian Dividend 1.90%
  • Weighted yield (per year) 3.38%

The portfolio's average dividend yield is 3.38%, with notable contributions from high-interest savings ETFs. Dividends provide a steady income stream, appealing to investors seeking regular cash flow. However, the focus on cash equivalents may limit growth. Balancing dividend-paying equities with growth-oriented assets can optimize income while enhancing capital appreciation, aligning better with both income and growth objectives.

Ongoing product costs Info

  • BMO Canadian Dividend 0.35%
  • Weighted costs total (per year) 0.02%

Portfolio costs are impressively low, with a total expense ratio (TER) of 0.02%, supporting better long-term performance. The BMO Canadian Dividend ETF has a slightly higher cost, but overall, fees are minimal. Low costs are beneficial as they preserve returns over time. Regularly reviewing and comparing fees to alternative investments can ensure the portfolio remains cost-effective, maximizing net 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.

The Efficient Frontier suggests that the current portfolio could be optimized for a better risk-return ratio. By adjusting asset weights and reducing overlap, an expected return of 4.54% could be achieved with a similar risk level. This optimization focuses on enhancing returns without increasing risk, ensuring the portfolio remains aligned with the investor's secure risk profile. Regularly revisiting these optimizations can maintain efficiency over time.

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