Balanced Portfolio with Strong Tech Focus and Moderate Diversification for Risk-Tolerant Investors

Report created on Jul 20, 2024

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.

Positions

The portfolio is composed of four ETFs with a significant allocation to the SPDR® Portfolio S&P 500 ETF at 50%, followed by Franklin FTSE India ETF at 30%, Vanguard Information Technology Index Fund ETF Shares at 15%, and iShares® Gold Trust Micro at 5%. With a balanced risk classification and moderate diversification, the portfolio leans heavily towards equities. This composition suggests a focus on growth with a reasonable risk exposure. It's essential to understand that such a setup might result in higher volatility, but also offers potential for substantial returns.

Growth Info

Assuming an initial investment, the portfolio's historical performance boasts a CAGR of 12.65%, indicating robust growth over time. However, it also experienced a maximum drawdown of -21.68%, highlighting potential volatility. This performance suggests that while the portfolio has delivered impressive returns, it is not immune to market downturns. Understanding these dynamics is crucial for setting realistic expectations and preparing for future market fluctuations. To improve resilience, consider diversifying further to mitigate potential drawdowns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, we project potential future outcomes for a hypothetical initial investment. The simulation shows an annualized return of 14.48%, with a 5th percentile outcome of 82.86% and a 67th percentile outcome of 650.24%. The high number of simulations with positive returns (994) suggests a strong likelihood of favorable performance. This analysis provides a probabilistic view of future returns, offering insights into potential risks and rewards. Maintaining a balanced approach can help navigate the uncertainty inherent in market investments.

Asset classes Info

  • Stocks
    94%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 94.43% of the total allocation. This concentration in equities indicates a focus on capital appreciation, aligning with a growth-oriented strategy. While stocks offer the potential for significant returns, they also come with increased risk and volatility. To balance this, consider incorporating other asset classes like bonds or real estate to provide stability and reduce overall portfolio risk. Such diversification can help smooth returns over time and protect against market downturns.

Sectors Info

  • Technology
    35%
  • Financials
    14%
  • Consumer Discretionary
    9%
  • Health Care
    7%
  • Industrials
    7%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation reveals a strong emphasis on technology at 35.47%, followed by financial services and consumer cyclicals. This concentration in tech suggests a bet on the sector's continued growth and innovation. However, it also exposes the portfolio to sector-specific risks. Diversifying across more sectors can help mitigate these risks and provide a more balanced exposure to different economic cycles. Consider adjusting the allocation to ensure a more even distribution across various industries, reducing dependency on any single sector.

Regions Info

  • North America
    65%
  • Asia Emerging
    30%

Geographically, the portfolio is predominantly focused on North America (64.57%), with a significant allocation to Asia Emerging (30%). This distribution highlights an emphasis on developed markets with a growth tilt towards emerging economies. While this can offer diversification and growth potential, it also introduces geopolitical and currency risks. To enhance geographic diversification, consider spreading investments across more regions. This approach can help capture global growth opportunities and reduce exposure to region-specific economic fluctuations.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio exhibits high correlation between the Vanguard Information Technology Index Fund ETF Shares and the SPDR® Portfolio S&P 500 ETF. This correlation suggests that these assets may move in tandem, potentially limiting diversification benefits. While correlated assets can provide consistent returns, they also increase the portfolio's vulnerability to sector-specific downturns. To enhance diversification, consider incorporating assets with lower correlations. This strategy can help reduce overall portfolio risk and improve resilience against market volatility.

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 current setup is not on the efficient frontier due to high correlations between some assets, limiting diversification benefits. The efficient frontier represents the optimal risk-return trade-off, and overlapping assets can hinder this optimization. While the portfolio performs well, there's room for improvement in diversification. To optimize, consider reducing correlations by adding uncorrelated assets, potentially enhancing risk-adjusted returns. This approach can help achieve a more efficient allocation, balancing growth potential with risk management.

Dividends Info

  • Franklin FTSE India ETF 1.60%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 1.17%

The portfolio's dividend yield stands at 1.17%, with contributions from the Franklin FTSE India ETF, SPDR® Portfolio S&P 500 ETF, and Vanguard Information Technology Index Fund ETF Shares. While not a primary focus, dividends can provide a steady income stream and contribute to total returns. Understanding the role of dividends in the portfolio is essential for income-focused investors. To enhance income potential, consider increasing exposure to dividend-paying assets. This can help balance growth objectives with income generation, offering a more comprehensive investment strategy.

Ongoing product costs Info

  • Franklin FTSE India ETF 0.19%
  • iShares® Gold Trust Micro 0.09%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is low at 0.09%, indicating cost-efficient management. The SPDR® Portfolio S&P 500 ETF has the lowest cost, while the Franklin FTSE India ETF is slightly higher. Keeping costs low is crucial for maximizing net returns over time. High fees can erode gains, so maintaining a focus on cost-efficient investments is vital. Continuously monitoring and managing expenses can help ensure that the portfolio remains optimized for long-term growth. Consider reviewing the cost structure periodically to maintain efficiency.

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