A balanced portfolio with strong growth focus but limited geographical diversification

Report created on Jan 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is primarily composed of ETFs, with a significant focus on large-cap U.S. equities. Notably, the Vanguard S&P 500 ETF and Invesco NASDAQ 100 ETF make up nearly half of the portfolio. This composition leans heavily towards growth-oriented investments, which may not align with typical balanced portfolio benchmarks. Diversification is low, as indicated by the concentration in a few ETFs. A more diversified structure could include varied asset classes like bonds or international equities to balance risk and reward.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.25%, which is impressive. However, it also experienced a maximum drawdown of -18.33%, highlighting potential volatility. Comparing these figures to a benchmark like the S&P 500, which has a similar long-term CAGR, suggests competitive performance. It's crucial to remember that past performance is not a guarantee of future results, and understanding the reasons behind these historical trends can guide future adjustments.

Projection Info

Using Monte Carlo simulations, this portfolio shows a wide range of potential outcomes. With 1,000 simulations, the median outcome (50th percentile) projects a significant increase of 669.31% in portfolio value. Simulations suggest a high likelihood of positive returns, with 997 out of 1,000 showing gains. However, remember that these projections are based on past data and assumptions, which may not reflect future market conditions. Regularly reviewing projections can help adjust expectations and strategies accordingly.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, with a negligible portion in cash. This heavy stock allocation can drive growth but also increases exposure to market volatility. Balanced portfolios typically include a mix of asset classes like bonds, which can provide stability and income. Considering adding bonds or other asset types could enhance diversification and potentially reduce risk. This adjustment would align the portfolio more closely with conventional balanced portfolio benchmarks.

Sectors Info

  • Technology
    28%
  • Consumer Staples
    18%
  • Health Care
    15%
  • Energy
    11%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Financials
    5%
  • Industrials
    3%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

Sector allocation shows a strong tilt towards technology, consumer defensive, and healthcare sectors. While these sectors have historically driven growth, they also introduce sector-specific risks. For instance, technology-heavy portfolios may experience volatility during regulatory changes or interest rate hikes. A more balanced sector allocation could mitigate these risks. Incorporating sectors like utilities or real estate might offer stability and income, aligning better with a balanced investment approach.

Regions Info

  • North America
    99%

Geographically, the portfolio is highly concentrated in North American equities, with minimal exposure to other regions. This lack of geographic diversification could limit growth opportunities and increase vulnerability to regional economic downturns. Comparing this to global benchmarks, which often include significant international exposure, suggests room for improvement. Expanding geographic exposure to include developed and emerging markets could enhance diversification and capture global growth potential.

Redundant positions Info

  • Vanguard Growth Index Fund ETF Shares
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio contains highly correlated assets, such as the Vanguard Growth Index Fund ETF Shares and Invesco NASDAQ 100 ETF. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. In market downturns, this could lead to significant losses. Reducing overlap by replacing one of these with a less correlated asset could improve risk management. Diversifying across different asset types or sectors may also enhance portfolio resilience.

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.

Optimizing the portfolio using the Efficient Frontier could enhance the risk-return ratio. This method identifies the best possible allocation among current assets. However, it's important to note that optimization doesn't necessarily mean diversification. The goal is to achieve the highest expected return for a given level of risk. Consider adjusting allocations to reduce correlation and enhance diversification, which might improve efficiency and align with balanced investment objectives.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Consumer Staples Index Fund ETF Shares 1.80%
  • Vanguard Health Care Index Fund ETF Shares 1.10%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Energy Select Sector SPDR® Fund 3.30%
  • Weighted yield (per year) 1.26%

The portfolio's dividend yield is 1.26%, with the Energy Select Sector SPDR Fund contributing the highest individual yield. This yield is modest and may not significantly impact total returns for growth-focused investors. However, dividends can provide a steady income stream and help offset market volatility. If income is a priority, consider increasing exposure to dividend-focused assets. Balancing growth and income can contribute to a more stable, long-term investment strategy.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Consumer Staples Index Fund ETF Shares 0.10%
  • Vanguard Health Care Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Energy Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, which is quite low. This cost efficiency supports better long-term returns, as lower fees mean more of your money is working for you. Comparing this to the average mutual fund TER, which can be over 1%, highlights the portfolio's cost advantage. Maintaining low costs is beneficial, but it's also important to ensure that low-cost assets align with your overall investment goals and risk tolerance.

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