A balanced portfolio with strong US focus and tech-heavy concentration

Report created on Dec 24, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with a notable emphasis on US-based ETFs like the Invesco NASDAQ 100 ETF and Vanguard S&P 500 ETF. The allocation indicates a strong preference for growth-oriented investments, particularly in the technology sector. This composition aligns with a balanced risk classification, aiming for growth while maintaining some diversification. To enhance diversification, consider increasing exposure to underrepresented asset classes such as bonds or real estate, which could provide stability during market downturns.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 13.7%. This reflects strong past returns, particularly driven by the US equity market's performance. The maximum drawdown of -29.1% highlights potential volatility, which is typical for equity-heavy portfolios. While past performance is a useful benchmark, it's important to remember that it doesn't guarantee future results. Monitoring performance against relevant benchmarks can help identify trends and make informed adjustments.

Projection Info

The forward projection, using Monte Carlo simulations, suggests a wide range of potential outcomes, with a median return of 307.82%. Monte Carlo simulations use historical data to model potential future returns, but they can't predict specific outcomes. The high number of simulations with positive returns (980 out of 1,000) indicates a favorable outlook. However, the variability in potential returns underscores the need for a diversified strategy to mitigate risks.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly invested in stocks, comprising over 99% of the allocation. This heavy stock concentration can drive growth but also increases exposure to market volatility. Diversifying across asset classes, such as adding bonds or alternative investments, can reduce risk and enhance stability. Comparing this allocation to benchmarks that typically include a mix of stocks, bonds, and other assets can provide insights into achieving a more balanced approach.

Sectors Info

  • Technology
    34%
  • Consumer Discretionary
    13%
  • Telecommunications
    11%
  • Financials
    10%
  • Industrials
    8%
  • Health Care
    8%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is heavily weighted towards the technology sector, comprising 33.7% of the allocation. While this sector has historically driven strong returns, it can also be volatile, especially during periods of regulatory scrutiny or interest rate hikes. Balancing this concentration with exposure to more stable sectors, such as healthcare or utilities, can help mitigate sector-specific risks. Aligning sector weights with broader market benchmarks can enhance diversification.

Regions Info

  • North America
    71%
  • Europe Developed
    10%
  • Asia Emerging
    6%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

With 71.1% of assets in North America, the portfolio is significantly exposed to US markets. While this reflects confidence in the US economy, it limits global diversification. Increasing exposure to emerging markets or underrepresented regions like Latin America or Africa/Middle East could enhance diversification and capture growth opportunities. Comparing geographic allocation to global benchmarks can provide guidance on achieving a more balanced global exposure.

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 can potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current holdings. Adjusting allocations between existing assets could enhance efficiency without needing to add new investments. This approach focuses on maximizing returns for a given level of risk, ensuring the portfolio aligns with the investor's risk tolerance and return expectations.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Invesco NASDAQ 100 ETF 0.40%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Vanguard Total International Stock Index Fund ETF Shares 1.70%
  • Weighted yield (per year) 1.16%

The portfolio's dividend yield stands at 1.16%, providing a modest income stream. While dividends can enhance total returns, the focus on growth-oriented ETFs, such as the Invesco NASDAQ 100, results in lower yields. Investors seeking higher income might consider increasing allocation to dividend-focused funds or sectors with historically higher yields, such as utilities or consumer staples, to complement growth investments.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is a low 0.1%, which is commendable and supports better long-term performance by minimizing costs. Low-cost ETFs like Vanguard S&P 500 contribute to this efficiency. Regularly reviewing and potentially replacing higher-cost funds with similar lower-cost alternatives can further enhance net returns. Keeping costs low is a key component of optimizing overall portfolio performance.

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