A well-diversified portfolio with balanced risk and strong global equity exposure

Report created on Feb 8, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed predominantly of equities, with a 95% allocation to various equity ETFs and a modest 5% allocation to bonds. This structure aligns with a balanced investment profile, aiming to capture growth while managing risk through diversification. Compared to typical balanced portfolios, it has a higher equity exposure, which could increase potential returns but also volatility. To maintain this balance, consider periodically reviewing the bond allocation, especially in changing interest rate environments, to ensure it continues to align with your risk tolerance and investment goals.

Growth Info

The historical performance of this portfolio, with a Compound Annual Growth Rate (CAGR) of 10.75%, indicates strong growth over time. This performance surpasses many traditional benchmarks, reflecting the benefits of its diversified equity focus. However, it also experienced a maximum drawdown of -28.84%, highlighting the risks associated with market volatility. To mitigate such risks, consider maintaining a cash reserve or exploring hedging strategies during periods of market uncertainty. Remember, past performance doesn't guarantee future results, so it's important to stay vigilant and adaptable.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 8.35% across simulations. This method uses historical data to simulate future scenarios, providing insight into possible portfolio performance. While the median outcome is positive, there's still a 5% chance of lower returns. It's crucial to understand that these projections are not predictions but rather tools to gauge potential risks and returns. Regularly reviewing these projections can help adjust strategies in response to changing market conditions.

Asset classes Info

  • US Equity
    40%
  • Stocks
    25%
  • Bonds
    5%

The asset class allocation in this portfolio is heavily weighted towards equities, with a minor bond component. This distribution supports growth potential but can lead to increased volatility. Compared to typical balanced benchmarks, the high equity allocation may offer higher returns, yet it could also expose the portfolio to equity market downturns. To enhance stability, consider gradually increasing the bond allocation or introducing alternative assets that may provide additional diversification benefits and reduce overall portfolio risk.

Sectors Info

  • Financials
    20%
  • Technology
    19%
  • Industrials
    11%
  • Consumer Discretionary
    9%
  • Health Care
    7%
  • Energy
    7%
  • Telecommunications
    6%
  • Basic Materials
    6%
  • Consumer Staples
    5%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is fairly balanced, with notable exposure to financial services (20%) and technology (19%). This reflects a mix of growth and value sectors, which can help balance risk and reward. However, the technology sector's volatility, especially during interest rate changes, may impact returns. Ensuring sector allocations align with personal risk tolerance is key. If the tech concentration is a concern, consider diversifying into more defensive sectors, such as consumer staples or utilities, to mitigate potential volatility.

Regions Info

  • North America
    65%
  • Europe Developed
    16%
  • Japan
    6%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    2%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is predominantly in North America (65%), with significant exposure to developed markets in Europe and Japan. This allocation provides solid diversification across stable economies but may limit potential growth from emerging markets. Compared to global benchmarks, the emerging market exposure is relatively low. To capture growth opportunities, consider increasing allocations to regions with higher growth potential, like Asia or Latin America, while being mindful of the associated risks.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    30%
  • Mid-cap
    18%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio is well-diversified across market capitalizations, with a strong emphasis on mega (42%) and big (30%) companies. This provides stability and potential for steady growth, as larger companies tend to be more resilient during market downturns. However, the lower allocation to small (5%) and micro (1%) caps might limit exposure to higher growth opportunities. To enhance diversification and growth potential, consider gradually increasing exposure to smaller-cap stocks, which can offer significant returns over time.

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's risk-return profile can be enhanced through optimization, aligning with the Efficient Frontier. This involves adjusting the current asset allocation to achieve the best possible risk-return ratio. By reallocating between existing holdings, you can potentially increase returns for the same level of risk or reduce risk for the same level of return. Regularly reviewing and rebalancing the portfolio ensures it remains on the Efficient Frontier, maximizing its efficiency and aligning with long-term investment goals.

Dividends Info

  • Mackenzie Canadian Equity Index ETF 1.30%
  • iShares Core MSCI Emerging Markets IMI Index ETF 0.70%
  • iShares Core MSCI EAFE IMI 1.60%
  • iShares Core S&P/TSX Capped Composite 1.30%
  • iShares Core S&P US Total Market 0.40%
  • BMO Discount Bond 1.00%
  • Weighted yield (per year) 0.97%

The portfolio's dividend yield is relatively modest at 0.97%, with most ETFs providing low to moderate yields. This suggests a focus on capital appreciation rather than income generation. For those seeking income, consider increasing exposure to higher-yielding assets or dividend-focused funds. Balancing growth and income needs can enhance overall portfolio returns, particularly in low-interest-rate environments where traditional income sources may be less attractive.

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