Balanced Portfolio with Moderate Diversification and High Technology Exposure Featuring Strong Historical Performance

Report created on Jul 14, 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 primarily composed of ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 55%. This provides a solid foundation in large-cap U.S. equities, which are generally considered stable and reliable. The remaining positions are diversified across clean energy, nuclear energy, large-cap growth, semiconductors, and a small bond allocation. This mix indicates a focus on growth with a nod towards sustainability and innovation. While the portfolio is moderately diversified, it leans heavily towards equities, suggesting a growth-oriented approach with some exposure to bonds for balance.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 11.54%. This impressive figure reflects the strong performance of U.S. equities, particularly in the technology and growth sectors. However, it's important to note the maximum drawdown of -25.43%, which indicates significant volatility during market downturns. The concentration in equities, especially in growth-oriented sectors, contributes to this volatility. While the returns have been robust, the risk of sharp declines is a consideration for those who are risk-averse.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This approach models a range of possible outcomes by simulating random variables. The results show a median return of 177.34% with a positive return in 866 simulations. However, there's a 5th percentile outcome of -37.94%, highlighting potential downside risk. The annualized return across simulations is 10.05%, suggesting potential for continued growth. Investors should be aware of the inherent uncertainty and prepare for various scenarios, focusing on long-term goals.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio's asset class allocation is predominantly in stocks, comprising 94.77%. Bonds make up a small portion at 4.93%, with minimal cash holdings. This heavy equity exposure aligns with a growth-focused strategy, aiming for capital appreciation. While equities offer higher returns, they also come with increased volatility. The limited bond allocation provides some stability but may not be sufficient during market downturns. Investors seeking to reduce risk might consider increasing bond exposure to balance the portfolio further.

Sectors Info

  • Technology
    35%
  • Utilities
    12%
  • Financials
    8%
  • Industrials
    7%
  • Health Care
    7%
  • Consumer Discretionary
    7%
  • Energy
    6%
  • Telecommunications
    6%
  • Consumer Staples
    3%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector allocation reveals a strong bias towards technology at 35.31%, followed by utilities and financial services. This concentration in technology underscores a focus on innovation and growth, which has driven past performance. However, overexposure to a single sector can increase risk, especially if the sector underperforms. Diversifying across more sectors could mitigate this risk and enhance stability. A broader sector allocation would provide a buffer against sector-specific downturns and contribute to a more resilient portfolio.

Regions Info

  • North America
    83%
  • Europe Developed
    5%
  • Asien Schwellenländer
    3%
  • Latin America
    1%
  • Australasia
    1%
  • Asien
    1%

Geographically, the portfolio is heavily weighted towards North America, representing 82.91% of the allocation. This reflects a strong home bias, which can be beneficial given the robust performance of U.S. markets. However, it limits exposure to international opportunities and diversification benefits. Expanding geographic allocation to include more developed and emerging markets could enhance growth potential and reduce reliance on a single region. A more balanced global approach may offer better risk-adjusted returns.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

Within the portfolio, there are highly correlated assets, particularly between the Vanguard S&P 500 ETF and the Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, offering limited diversification benefits. Reducing overlap by selecting assets with lower correlation could enhance diversification and reduce risk. By spreading investments across less correlated assets, the portfolio can achieve a smoother return profile and potentially improve overall performance.

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 the portfolio, it's crucial to address the issue of highly correlated assets that offer no diversification benefits. By reducing overlap, the portfolio can achieve a more efficient balance between risk and return. Moving along the efficient frontier, investors can adjust their risk profile by either increasing bond allocation for a more conservative approach or enhancing equity exposure for higher risk and potential returns. This strategic adjustment will better align the portfolio with the investor's risk tolerance and financial goals.

Dividends Info

  • Vanguard Total World Bond ETF 3.90%
  • iShares Global Clean Energy ETF 1.80%
  • VanEck Uranium+Nuclear Energy ETF 3.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Invesco PHLX Semiconductor ETF 0.70%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.50%

The portfolio's dividend yield is relatively modest at 1.5%, with the Vanguard Total World Bond ETF contributing the highest yield at 3.9%. While dividends provide a steady income stream, the focus here is more on capital growth than income generation. Investors seeking higher income might consider increasing allocations to dividend-paying assets. However, given the growth orientation, the current yield is reasonable. Balancing growth with income-generating assets could enhance the portfolio's overall return profile.

Ongoing product costs Info

  • Vanguard Total World Bond ETF 0.05%
  • iShares Global Clean Energy ETF 0.41%
  • VanEck Uranium+Nuclear Energy ETF 0.61%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Invesco PHLX Semiconductor ETF 0.19%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is low at 0.14%, indicating cost-efficient management. Low costs are crucial for maximizing net returns, as high fees can erode gains over time. The Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF have particularly low expense ratios, contributing to the portfolio's cost-effectiveness. Maintaining a focus on low-cost investments is advisable to preserve returns. Regularly reviewing and minimizing costs will ensure the portfolio remains efficient and aligned with financial goals.

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