Balanced Moderately Diversified Portfolio with Strong North American and Technology Focus and High Historical Performance

Report created on Dec 4, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is evenly split across six ETFs, each holding approximately 16.67%. This balanced distribution indicates a strategic approach to spreading risk and gaining exposure to various market segments. The emphasis on ETFs suggests a preference for diversified, passive investment strategies. While this approach reduces risk, it may also cap potential returns compared to more aggressive strategies. To enhance diversification, consider including different asset types beyond equities. This can help stabilize returns and reduce volatility during market downturns, aligning with a balanced investment strategy.

Growth Info

Historically, this portfolio has performed impressively with a CAGR of 15.6%, indicating strong growth over time. However, it faced a maximum drawdown of -24.18%, highlighting potential volatility. The fact that just 21 days account for 90% of returns underscores the importance of timing and market conditions in driving performance. While past performance doesn't guarantee future results, it shows the portfolio's potential under favorable conditions. To mitigate drawdowns, consider implementing risk management strategies, such as stop-loss orders or diversifying into less volatile assets, to protect gains during market downturns.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, shows promising potential for this portfolio. Assuming a hypothetical initial investment, the simulation projects a 5th percentile return of 93.13% and a median return of 618.11%. This suggests a high probability of positive returns, with 994 out of 1,000 simulations yielding gains. While these projections are optimistic, they also emphasize the inherent uncertainty in investing. To capitalize on this potential, maintain a long-term perspective and be prepared for short-term fluctuations. Regularly reassess your risk tolerance to ensure alignment with investment goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, accounting for over 99% of its composition. This strong equity focus can drive significant growth but also introduces higher volatility. The minimal allocation to cash and other assets may limit liquidity and downside protection. While equities are essential for long-term growth, consider incorporating more diverse asset classes, such as bonds or real estate, to balance risk and return. This diversification can help cushion the portfolio against market volatility and provide more stable returns, aligning with a balanced investment strategy.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Consumer Discretionary
    13%
  • Industrials
    9%
  • Telecommunications
    9%
  • Health Care
    8%
  • Energy
    6%
  • Consumer Staples
    6%
  • Basic Materials
    3%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is led by technology at 28.07%, followed by financial services and consumer cyclicals. This strong tech focus capitalizes on growth potential but also exposes the portfolio to sector-specific risks. Other sectors like healthcare, energy, and consumer defensive provide some diversification. However, the limited exposure to utilities and real estate may miss out on their stability benefits. To enhance diversification, consider increasing exposure to underrepresented sectors. This can help mitigate risks associated with over-concentration and improve the portfolio's resilience against sector-specific downturns.

Regions Info

  • North America
    82%
  • Asia Emerging
    10%
  • Asia Developed
    3%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for over 82% of its allocation. This heavy regional focus capitalizes on the stability and growth potential of the U.S. market but also exposes the portfolio to regional risks. Emerging markets, particularly in Asia, offer some diversification, albeit limited. To achieve a more globally diversified portfolio, consider increasing exposure to developed and emerging markets outside North America. This can help mitigate regional risks and capture growth opportunities in diverse economic environments, enhancing the portfolio's overall resilience.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Invesco NASDAQ 100 ETF
    High correlation

Within the portfolio, some assets exhibit high correlation, particularly the Schwab U.S. Large-Cap Growth ETF and Invesco NASDAQ 100 ETF. This overlap can reduce diversification benefits and increase vulnerability to specific market movements. While correlation is not inherently negative, excessive overlap can limit risk mitigation. To improve diversification, consider adjusting allocations to reduce reliance on highly correlated assets. This can enhance the portfolio's ability to weather market volatility and achieve more stable returns over time, aligning 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.

Before optimizing, focus on reducing highly correlated assets that offer limited diversification benefits. By moving along the efficient frontier, you can adjust the portfolio to be either riskier or more conservative. To pursue a riskier strategy, increase exposure to growth-oriented assets. For a more conservative approach, consider adding bonds or other stable investments. This balance can help align the portfolio with your risk tolerance and financial goals. Once correlation issues are addressed, optimization can enhance risk-adjusted returns, ensuring the portfolio remains resilient and aligned with investment objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 1.60%

The portfolio yields an average dividend of 1.6%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.3%. Dividends provide a steady income stream and can enhance total returns, particularly in volatile markets. While the dividend yield is modest, it complements the portfolio's growth potential. To boost income, consider reinvesting dividends or exploring higher-yield assets. This strategy can enhance compounding effects and contribute to long-term wealth accumulation, aligning with a balanced investment approach focused on both growth and income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, indicating a cost-effective investment strategy. Low costs are crucial for maximizing net returns, as they reduce the drag on performance. Each ETF has a varying cost, with the Schwab U.S. Large-Cap Growth ETF being the cheapest at 0.04%. While the current costs are competitive, regularly review fees to ensure they remain low. Consider switching to lower-cost alternatives if necessary, as minimizing expenses is a key component of optimizing portfolio performance and achieving long-term financial goals.

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