Balanced and Highly Diversified Portfolio with Strong Growth Potential and Moderate Risk

Report created on Jul 28, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of five ETFs, with a strong focus on equities, making up 94.6% of the total allocation. This high equity exposure aligns with a balanced risk profile, offering potential for growth while maintaining some stability. The inclusion of a bond ETF adds a conservative element, albeit a small one. The portfolio is well-diversified across different funds, reducing specific investment risks. A balanced mix like this is generally favorable for long-term growth, but it might experience volatility. Consider monitoring the equity-bond ratio to ensure it aligns with your risk tolerance and investment goals.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a compound annual growth rate (CAGR) of 12.67%. This suggests strong growth potential over the years. However, it's important to note the maximum drawdown of -23.66%, indicating periods of significant volatility. While the portfolio has capitalized on market upswings, it has also been susceptible to downturns. Understanding this performance pattern is crucial for setting realistic expectations. To mitigate potential risks, consider diversifying further or adjusting allocations to balance growth and stability.

Projection Info

Using a Monte Carlo simulation, we assessed the portfolio's future performance with 1,000 simulations. The median expected growth is around 309.93%, showcasing substantial potential. However, the 5th percentile indicates a potential downside of 57.37%, highlighting inherent risks. Monte Carlo simulations provide a range of possible outcomes, helping investors understand potential risks and rewards. Given this data, consider maintaining a diversified approach while being prepared for market fluctuations. Regularly reviewing and adjusting the portfolio can help align it with your long-term financial goals.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio primarily consists of stocks, accounting for 94.57% of the allocation, indicating a growth-oriented strategy. Bonds make up 4.95%, adding a layer of stability, while cash and other assets are minimal. This asset class distribution suggests a focus on capital appreciation while maintaining a small buffer against market volatility. Given the high stock allocation, the portfolio is likely to experience fluctuations. To enhance stability, consider increasing the bond allocation, especially if market conditions become uncertain or if a more conservative approach is desired.

Sectors Info

  • Technology
    24%
  • Financials
    14%
  • Consumer Discretionary
    10%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is well-diversified, with technology holding the largest share at 23.7%, followed by financial services and consumer cyclicals. This distribution reflects a balanced approach across various industries, reducing sector-specific risks. However, the high exposure to technology may introduce volatility, given the sector's historical fluctuations. A diversified sector allocation can help mitigate risks associated with individual market segments. To maintain a balanced approach, consider periodically reviewing sector weights and making adjustments to align with changing market dynamics and personal risk tolerance.

Regions Info

  • North America
    71%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, comprising 71.34% of the allocation. This concentration reflects a strong focus on the U.S. market, which has historically provided robust returns. Other regions, such as Europe and Asia, have smaller allocations, contributing to international diversification. While this geographic composition leverages the strength of the U.S. market, it might limit exposure to growth opportunities elsewhere. To enhance global diversification, consider increasing allocations to other regions, balancing the potential risks and rewards of international markets.

Redundant positions Info

  • Invesco NASDAQ 100 ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Invesco NASDAQ 100 ETF and the Vanguard S&P 500 ETF. This correlation suggests that these assets often move in tandem, potentially reducing diversification benefits. While correlated assets can amplify returns during market upswings, they may also increase risk during downturns. To optimize the portfolio, consider reducing overlap by selecting assets with lower correlations. This approach can enhance diversification, improve risk management, and potentially lead to more stable returns over time.

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 optimization chart suggests focusing on reducing asset overlap before further optimization. Removing highly correlated assets can enhance diversification and mitigate risk. Moving along the efficient frontier allows for adjustments between risk and return. To achieve a riskier portfolio, increase equity allocation, while a more conservative approach involves boosting bonds. Consider periodic reviews to ensure the portfolio remains aligned with financial goals and market conditions. Optimization isn't a one-time event; it requires ongoing assessment and adjustment to maintain balance and performance.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Tax-Exempt Bond Index Fund ETF Shares 3.10%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.12%

The portfolio has a total dividend yield of 2.12%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.4%. This steady stream of income can be a valuable component of the portfolio, offering returns even during periods of market volatility. Dividends can provide a cushion against market downturns and contribute to overall portfolio growth. To maximize income potential, consider reinvesting dividends or exploring additional dividend-focused investments. Balancing growth and income can lead to a well-rounded investment strategy.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Tax-Exempt Bond Index Fund ETF Shares 0.05%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is relatively low at 0.06%, indicating cost-effective management. Low costs are crucial for maximizing net returns, as they prevent fees from eroding gains. Each ETF in the portfolio has a competitive expense ratio, contributing to the overall efficiency. Maintaining low costs is an essential aspect of a successful investment strategy, as it directly impacts the bottom line. To continue optimizing returns, regularly review expense ratios and consider cost-effective alternatives if necessary, ensuring that fees remain in check.

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