A balanced Canadian portfolio with strong US equity focus and moderate diversification

Report created on Jan 3, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards US equities, with the Vanguard S&P 500 Index ETF making up 57% and the Invesco NASDAQ 100 Index ETF CAD Units at 22%. The iShares Core Equity Portfolio adds another 16%, while the Fidelity Advantage Bitcoin ETF contributes 5%. Such a composition leans heavily on US market performance. A balanced portfolio often includes a wider range of asset types to spread risk. Consider diversifying further by including more fixed income or alternative assets to balance the heavy equity exposure.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.87%. This suggests strong growth over time, though it's important to note the significant maximum drawdown of -25.22%. While high returns are appealing, the drawdown indicates potential volatility. Comparing this to common benchmarks, the returns are impressive, but the risk is also higher. To mitigate this, consider strategies to reduce volatility, such as incorporating more stable investments.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes based on historical data, with an annualized return of 20.83% across simulations. This method uses past data to forecast future performance, but remember, it doesn’t guarantee results. The 5th percentile shows a modest growth of 10.71%, while the 67th percentile suggests substantial growth, highlighting the portfolio's potential. To prepare for various scenarios, ensure your investment strategy is adaptable and aligns with your risk tolerance.

Asset classes Info

  • US Equity
    86%
  • Other
    5%
  • Stocks
    4%

The portfolio is predominantly invested in US equities, accounting for nearly 86%. This concentration can drive growth during strong US market performance but also increases vulnerability to US-specific downturns. With minimal allocation to other asset classes, opportunities for diversification are limited. Consider incorporating more global equities or fixed income assets to enhance diversification and reduce reliance on US market trends.

Sectors Info

  • Technology
    33%
  • Financials
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

The sector allocation is tech-heavy, with 33% in technology, followed by financial services and consumer cyclicals. This concentration can lead to higher volatility, especially during market shifts affecting these sectors. A more balanced sector allocation can help mitigate sector-specific risks. Consider increasing exposure to underrepresented sectors such as utilities or real estate, which can provide stability and income.

Regions Info

  • North America
    90%
  • Europe Developed
    3%
  • Japan
    1%

The portfolio's geographic exposure is overwhelmingly North American at nearly 90%, with limited exposure to other regions. This lack of geographic diversification can be risky if North American markets underperform. Expanding exposure to developed and emerging markets could provide a hedge against regional downturns and capture growth opportunities in different economies. Consider increasing allocations to Europe, Asia, or other regions.

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 could potentially benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. This involves adjusting the current asset allocation to achieve maximum returns for a given level of risk. While this doesn’t necessarily mean adding new assets, it could involve reallocating existing ones to improve efficiency. Regularly reviewing and adjusting the portfolio can ensure it remains aligned with your risk tolerance and return expectations.

Dividends Info

  • Invesco NASDAQ 100 Index ETF CAD Units 0.20%
  • Vanguard S&P 500 Index ETF 0.50%
  • iShares Core Equity Portfolio 0.90%
  • Weighted yield (per year) 0.47%

The portfolio's dividend yield is relatively low at 0.47%, which may not suit income-focused investors. Dividends can provide a steady income stream, especially in volatile markets. While growth is a focus here, consider balancing with higher-yield assets if income is a priority. This could involve integrating dividend-focused funds or stocks that offer regular payouts.

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