A broadly diversified portfolio with strong US focus and efficient cost structure

Report created on Dec 23, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards ETFs, with a strong emphasis on large-cap US equities, particularly the S&P 500. This is a common strategy for balanced portfolios, providing broad market exposure. However, the portfolio lacks significant exposure to non-US markets and alternative asset classes like bonds. Diversifying into different asset classes can help reduce risk and improve stability. Consider adding assets that align with your risk tolerance and investment goals to enhance diversification.

Growth Info

Historically, the portfolio has performed well with a CAGR of 13.67%, indicating strong growth over time. The max drawdown of -25.7% highlights periods of significant loss, which is typical for equity-heavy portfolios. While past performance is no guarantee of future results, the historical data suggests resilience and potential for recovery. Comparing to benchmarks, the portfolio's performance aligns with typical large-cap US equity indices. Monitoring performance against benchmarks can help gauge progress towards financial goals.

Projection Info

Forward projections using Monte Carlo simulations show a median expected growth of 420.71% over a set period. Monte Carlo simulations use historical data to estimate a range of potential outcomes, but they are not predictions. With 995 out of 1,000 simulations showing positive returns, the portfolio appears to have a favorable risk-return profile. However, it's essential to remember that these projections are based on historical data and assumptions, which may not reflect future market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with nearly 100% allocation, which can lead to higher volatility. While this allocation supports growth potential, it also increases exposure to market fluctuations. Diversification across asset classes, such as including bonds or commodities, could provide more stability. Comparing to benchmark allocations, a more balanced approach typically includes a mix of equities and fixed income. Adjusting the asset class mix might better align with a balanced risk profile.

Sectors Info

  • Technology
    30%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation shows a significant tilt towards technology at nearly 30%, followed by financial services and consumer cyclicals. This concentration can lead to higher volatility, especially during sector-specific downturns. Aligning sector weights more closely with benchmarks could improve diversification. For instance, increasing exposure to underrepresented sectors like utilities or real estate might reduce sector-specific risks. It's crucial to regularly review sector allocations to ensure they align with market conditions and personal risk tolerance.

Regions Info

  • North America
    82%
  • Europe Developed
    6%
  • Asia Emerging
    5%
  • Asia Developed
    2%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Australasia
    1%
  • Latin America
    1%

The portfolio is heavily concentrated in North America, with over 82% exposure, which limits geographic diversification. While this aligns with a US-based investor's familiarity, it may miss growth opportunities in other regions. Increasing exposure to emerging markets or developed regions outside North America could enhance diversification and potentially improve returns. Comparing geographic allocations to global benchmarks can help identify underrepresented areas and guide diversification efforts.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    SPDR® Portfolio S&P 500 ETF
    Vanguard S&P 500 ETF
    High correlation
  • SPDR® Portfolio S&P 600 Small Cap ETF
    SPDR Russell Small Cap Completeness
    High correlation

The portfolio contains highly correlated assets, particularly among large-cap US equity ETFs. High correlation means these assets tend to move together, reducing the diversification benefits. During market downturns, this could lead to more pronounced losses. Consider replacing some overlapping ETFs with those that offer unique exposures or lower correlations. This adjustment could enhance diversification and potentially improve risk-adjusted returns, aligning more closely with a balanced investment strategy.

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 can be optimized by addressing the high correlation among assets, which currently limits diversification benefits. Utilizing the Efficient Frontier concept, which aims to achieve the best possible risk-return ratio, can guide rebalancing efforts. This involves adjusting the current allocation to reduce overlap and enhance diversification. While the portfolio is cost-efficient, focusing on reducing correlation and aligning with the Efficient Frontier can improve overall efficiency and risk management.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.50%
  • SPDR® Portfolio S&P 500 ETF 0.90%
  • SPDR Russell Small Cap Completeness 1.00%
  • SPDR® Portfolio S&P 600 Small Cap ETF 1.20%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Value Index Fund ETF Shares 1.70%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.80%
  • Weighted yield (per year) 0.97%

The portfolio's total dividend yield is 0.97%, which contributes modestly to overall returns. Dividend income can provide a stable cash flow, especially in volatile markets. However, the yield is relatively low, reflecting the growth-oriented nature of the portfolio. For those seeking income, increasing allocations to higher-yielding assets might be beneficial. It's important to balance the pursuit of dividends with growth potential, ensuring the portfolio aligns with long-term financial goals.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • SPDR Russell Small Cap Completeness 0.03%
  • SPDR® Portfolio S&P 600 Small Cap ETF 0.03%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, which is beneficial for long-term performance. Low costs mean more of your money is working for you, compounding over time. This cost efficiency is a strong advantage, as high fees can erode returns. Regularly reviewing and comparing the expense ratios of current holdings with alternatives can help maintain cost-effectiveness. Staying vigilant about fees supports better compounding and aligns with best investment practices.

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