Moderately diversified portfolio with balanced risk and a focus on US equities

Report created on Dec 10, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists of four ETFs with a significant focus on US equities. The iShares Russell 2000 ETF and Invesco S&P 500® Equal Weight ETF each make up approximately one-third of the portfolio, while the iShares MSCI ACWI ETF and Invesco NASDAQ 100 ETF account for smaller portions. This composition suggests a moderate diversification strategy with a tilt towards US markets. A balanced approach like this can offer growth potential while managing risk. However, it may benefit from further diversification into other asset classes or regions to enhance stability and reduce reliance on the US market.

Growth Info

Historically, this portfolio has shown a strong performance with a compound annual growth rate (CAGR) of 13.67%. This indicates a robust return over time, although it has experienced a maximum drawdown of -26.19%, reflecting periods of significant decline. Understanding past performance is crucial as it provides insights into how the portfolio might react in different market conditions. While past performance is not indicative of future results, it can guide expectations and help assess risk tolerance. Maintaining a diversified approach can potentially mitigate such drawdowns in the future.

Projection Info

The forward projection using Monte Carlo simulations, which leverage historical data to predict future outcomes, suggests a promising outlook. With 1,000 simulations, the portfolio shows an annualized return of 15.19%, with a high probability of positive returns. This projection highlights potential growth opportunities, but it's important to remember that simulations are based on historical trends and assumptions, which may not account for future market changes. Regularly reviewing and adjusting the portfolio can help align it with evolving market conditions and personal investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.8% of the allocation in equities and a minimal presence in cash and other assets. While this can drive growth, it also increases exposure to market volatility. Diversifying into other asset classes such as bonds or commodities could provide more stability and reduce risk. A balanced mix of asset classes typically helps cushion against market fluctuations and can enhance the portfolio's resilience over time, especially during market downturns.

Sectors Info

  • Technology
    21%
  • Financials
    15%
  • Industrials
    13%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Real Estate
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    4%

Sector allocation is relatively balanced, with a notable concentration in technology, financial services, and industrials. Technology leads with over 21%, indicating a growth-oriented strategy. While sector diversity is beneficial, overexposure to a single sector can amplify risk if that sector underperforms. To mitigate this, consider adjusting allocations to ensure a more even distribution across sectors. This can help manage sector-specific risks and provide more consistent returns across different market conditions.

Regions Info

  • North America
    91%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

The portfolio has a strong geographic concentration in North America, accounting for 91% of the allocation. While this reflects confidence in the US market, it limits exposure to international opportunities. Expanding geographic diversification by increasing investments in developed and emerging markets outside North America could enhance growth potential and reduce regional risks. A more global approach can capture diverse economic cycles and provide a hedge against localized downturns.

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.

An analysis of the Efficient Frontier suggests potential for optimization. By reallocating existing assets, the portfolio could achieve a more favorable risk-return ratio, with an expected return of 15.11% at the same risk level. This optimization process focuses on maximizing returns for a given level of risk, rather than increasing diversification. Regularly reassessing asset allocations and making strategic adjustments can help maintain an efficient portfolio aligned with personal risk tolerance and investment objectives.

Dividends Info

  • iShares MSCI ACWI ETF 1.50%
  • iShares Russell 2000 ETF 1.10%
  • Invesco NASDAQ 100 ETF 0.60%
  • Invesco S&P 500® Equal Weight ETF 1.40%
  • Weighted yield (per year) 1.26%

The portfolio yields a total dividend of 1.26%, contributing to overall returns. Dividends provide a steady income stream and can enhance total returns, especially in low-growth environments. While the yield is moderate, reinvesting dividends can compound growth over time. To boost income, consider increasing allocations to higher-yielding assets, but be mindful of the associated risks. Balancing growth and income is key to achieving long-term financial goals.

Ongoing product costs Info

  • iShares MSCI ACWI ETF 0.32%
  • iShares Russell 2000 ETF 0.19%
  • Invesco NASDAQ 100 ETF 0.15%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • Weighted costs total (per year) 0.22%

With a total expense ratio (TER) of 0.22%, the portfolio is cost-efficient, minimizing the drag on returns. Low costs are crucial for maximizing net returns over time. Even small reductions in fees can significantly impact long-term wealth accumulation. Regularly reviewing and comparing fund costs can help identify opportunities to further minimize expenses without compromising on quality or diversification. Staying cost-conscious is a simple yet effective way to enhance portfolio performance.

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