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A balanced yet concentrated portfolio with significant focus on North American equities

Report created on Apr 8, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification
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Positions

The portfolio is heavily weighted towards equities, with a significant 35% allocation to the Invesco NASDAQ 100 ETF, 20% to Schwab U.S. Dividend Equity ETF, and 30% in financial sector stocks. This composition shows a strong focus on growth and income through dividends. While the portfolio's equity focus aligns with common growth strategies, the lack of diversification into bonds or alternative assets may increase volatility. To enhance diversification, consider incorporating different asset classes such as fixed income or real assets, which can provide stability during market downturns.

Growth Info

Historically, the portfolio has delivered a robust CAGR of 14.29%, outperforming many benchmarks. However, it experienced a maximum drawdown of -25.91%, indicating significant volatility during market downturns. While past performance is not indicative of future results, these metrics suggest the portfolio has potential for high returns but also carries substantial risk. To mitigate such drawdowns, consider strategies like rebalancing or increasing cash reserves, which can help cushion against future market fluctuations.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future outcomes, shows an optimistic outlook with a median return of 599.5% over the investment horizon. However, it's important to note that simulations are not guarantees and rely on historical patterns that may not repeat. Given the high annualized return of 17.06% across simulations, maintaining current allocations could be beneficial. Nevertheless, regularly reviewing and adjusting the portfolio based on market conditions can help in achieving desired outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, offering no exposure to other asset classes like bonds or real estate. This lack of diversification can lead to increased risk, particularly in volatile markets. While stocks offer growth potential, incorporating other asset classes could provide more stability and reduce overall portfolio risk. Consider adding fixed income or alternative investments to balance the risk-return profile and improve diversification.

Sectors Info

  • Financials
    34%
  • Technology
    21%
  • Consumer Staples
    15%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Discretionary
    6%
  • Health Care
    6%
  • Energy
    3%
  • Basic Materials
    1%
  • Utilities
    1%

The portfolio has a notable concentration in financial services at 34% and technology at 21%, which could lead to higher volatility, especially during sector-specific downturns. While these sectors have driven growth, they also carry sector-specific risks, such as regulatory changes or economic shifts. To mitigate these risks, consider diversifying into underrepresented sectors like healthcare or utilities, which may offer more stability and counterbalance sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio allocated to North America, there's limited geographic diversification. This concentration exposes the portfolio to regional economic and political risks. While North American markets have been strong, diversifying into international markets, including emerging economies, could provide growth opportunities and reduce reliance on a single economic region. Expanding geographic exposure can also help hedge against potential domestic market downturns.

Market capitalization Info

  • Large-cap
    52%
  • Mega-cap
    31%
  • Mid-cap
    15%
  • Small-cap
    1%

The portfolio is heavily weighted towards large-cap stocks, with 52% in big caps and 31% in mega caps. This focus on large companies typically offers stability and lower volatility but may limit growth potential compared to smaller, more dynamic companies. To enhance growth prospects, consider incorporating more mid-cap and small-cap stocks, which can provide higher returns, albeit with increased risk. Balancing market capitalization can offer a mix of stability and growth.

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.

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The portfolio could potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. This optimization involves adjusting current asset allocations to achieve a more efficient balance. While the portfolio already shows strong performance, exploring different allocation strategies could enhance returns or reduce risk. Consider employing optimization tools or consulting with a financial advisor to explore these possibilities and tailor the portfolio to better meet your investment goals.

Dividends Info

  • Goldman Sachs Group Inc 2.50%
  • JPMorgan Chase & Co 1.70%
  • Morgan Stanley 3.60%
  • Invesco NASDAQ 100 ETF 0.70%
  • Schwab U.S. Dividend Equity ETF 4.20%
  • Industrial Select Sector SPDR® Fund 1.30%
  • Consumer Staples Select Sector SPDR® Fund 2.60%
  • Weighted yield (per year) 2.19%

The portfolio's dividend yield stands at 2.19%, with significant contributions from Schwab U.S. Dividend Equity ETF and Morgan Stanley. Dividends provide a steady income stream and can enhance total returns, especially in volatile markets. For income-focused investors, this yield is attractive. However, if growth is a priority, consider balancing dividend-paying stocks with growth-oriented equities, which may offer higher capital appreciation potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Industrial Select Sector SPDR® Fund 0.09%
  • Consumer Staples Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, which supports better long-term performance by minimizing costs. Lower costs mean more of your returns stay in your pocket, compounding over time. Maintaining low-cost investments is beneficial, but it's also crucial to ensure that these investments align with your overall strategy and risk tolerance. Regularly reviewing cost structures and exploring cost-effective alternatives can further enhance returns.

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