Balanced Portfolio with Strong US Focus and Low Diversity but High Historical Performance

Report created on Nov 27, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards common stocks and ETFs, with a significant portion allocated to US-based financial and technology sectors. JPMorgan Chase & Co is the largest single holding at over 25%, while the rest is spread across various S&P 500 ETFs. This composition reflects a concentrated bet on the US market, particularly large-cap stocks. While this allocation can offer robust growth potential, it lacks diversification, which could expose the portfolio to sector-specific risks. Consider diversifying into other asset classes or regions to balance potential risks and returns.

Growth Info

Historically, the portfolio has delivered impressive returns with a compound annual growth rate of 20.3%. This performance suggests strong growth momentum, likely driven by the US market's recent bullish trends. However, the maximum drawdown of -16.9% indicates exposure to market volatility. While past performance is not indicative of future results, maintaining a balanced approach can help manage potential downturns. To sustain growth, consider strategies that mitigate drawdowns, such as incorporating more defensive assets or diversifying sector exposure.

Projection Info

Using a Monte Carlo simulation, the portfolio shows promising future growth potential, with a median projected return of 1,086.36%. This method uses random sampling to predict potential outcomes, providing a range of possibilities. While the simulations suggest a high probability of positive returns, they also highlight the importance of managing risk. To align with these projections, consider strategies that balance growth with risk management, such as periodic rebalancing or exploring alternative asset classes to hedge against unforeseen market shifts.

Asset classes Info

  • Stocks
    98%
  • Not classified
    1%

The portfolio is overwhelmingly concentrated in stocks, accounting for over 98% of the allocation. This heavy reliance on equities can drive significant growth but also increases exposure to market volatility. While stocks are essential for capital appreciation, incorporating other asset classes like bonds or real estate could offer stability and income. Diversifying asset classes can reduce overall portfolio risk and provide a buffer during market downturns. Consider evaluating risk tolerance and investment goals to determine a more balanced asset allocation strategy.

Sectors Info

  • Financials
    34%
  • Technology
    27%
  • Consumer Discretionary
    8%
  • Telecommunications
    8%
  • Health Care
    7%
  • Industrials
    5%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

With a strong focus on financial services and technology, the portfolio is heavily concentrated in just a few sectors. While these sectors have shown robust growth, such concentration can lead to heightened risk if these industries face downturns. Diversifying into other sectors like healthcare, consumer goods, or energy could provide more stability and reduce sector-specific risks. A broader sector allocation can help capture growth opportunities across different economic cycles, enhancing the portfolio's resilience to market fluctuations.

Regions Info

  • North America
    99%

Geographically, the portfolio is almost entirely North America-focused, with over 99% of assets in this region. While this focus can capitalize on the US market's growth, it limits exposure to international opportunities. Diversifying into other regions like Europe or Asia could provide access to different growth drivers and reduce geographic risk. A more global allocation can help mitigate the impact of regional economic downturns and capture growth in emerging markets. Consider exploring international funds or ETFs to broaden geographic exposure.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard S&P 500 Value Index Fund ETF Shares
    JPMorgan Nasdaq Equity Premium Income ETF
    Vanguard S&P 500 Growth Index Fund ETF Shares
    SPDR S&P 500 ETF Trust
    High correlation

The portfolio contains several highly correlated assets, particularly among the S&P 500 ETFs. This correlation suggests that these assets tend to move in the same direction, offering little diversification benefit. High correlation can lead to increased volatility and risk, particularly during market downturns. To enhance diversification, consider reducing overlapping positions and adding assets with lower correlations. This strategy can help smooth returns and decrease portfolio risk by ensuring that not all assets react similarly to market events.

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 by reducing overlapping assets that offer no diversification benefits. By focusing on the efficient frontier, the investor can achieve a more balanced risk-return profile. Moving towards riskier or more conservative allocations involves adjusting the mix of asset classes. To enhance diversification, consider reallocating funds to less correlated assets or exploring different sectors and regions. This approach can improve the portfolio's resilience to market volatility and align it more closely with the investor's risk tolerance and financial goals.

Dividends Info

  • JPMorgan Nasdaq Equity Premium Income ETF 9.30%
  • JPMorgan Chase & Co 1.80%
  • SPDR S&P 500 ETF Trust 1.20%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 Value Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.99%

The portfolio's dividend yield stands at 1.99%, with the JPMorgan Nasdaq Equity Premium Income ETF contributing significantly at 9.3%. While dividends offer a steady income stream, the overall yield is relatively low, given the portfolio's focus on growth-oriented stocks. To enhance income, consider incorporating more high-dividend-yielding assets or dividend-focused funds. Balancing growth with income-generating investments can provide a more stable cash flow and support long-term financial goals, particularly for investors seeking regular income.

Ongoing product costs Info

  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 Value Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is a competitive 0.08%, indicating low investment costs. This low TER is advantageous, as it minimizes the drag on returns, allowing more of the portfolio's growth to compound over time. Keeping costs low is crucial for maximizing net returns, particularly in a long-term investment strategy. Regularly reviewing and optimizing the cost structure can ensure that the portfolio remains efficient. Consider maintaining a focus on low-cost funds and ETFs to preserve this cost advantage.

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