A balanced US-focused portfolio with strong growth potential and broad diversification

Report created on Feb 16, 2025

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 99% of assets in stocks and only 1% in cash. This aligns with a growth-focused strategy, but it also exposes the portfolio to market volatility. Comparing this to a typical balanced benchmark, which might include more fixed-income assets, this portfolio is more aggressive. This composition suggests a strong belief in long-term equity growth. Consider diversifying further with bonds or alternative assets to reduce risk, especially if nearing retirement or a significant financial milestone.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 12.77%. This is impressive when compared to a typical balanced benchmark. However, the maximum drawdown of -33.83% indicates significant volatility during downturns. This highlights the importance of having a risk management strategy in place. If the portfolio's volatility is a concern, consider rebalancing to include more stable assets. Remember, past performance doesn't guarantee future results, but it can inform expectations.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, show a promising potential for growth. The median projection suggests a portfolio increase of 353.4%, with even the lower 5th percentile projecting positive returns. However, it's important to note that simulations are based on historical patterns and cannot account for unforeseen market events. To prepare for various market conditions, consider stress-testing the portfolio against different economic scenarios.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's allocation is heavily tilted towards equities, with 99% in stocks and minimal exposure to cash. This single asset class focus amplifies growth potential but also increases risk. Compared to a balanced benchmark with diversified asset classes, this portfolio is more aggressive. To mitigate risk, consider integrating other asset classes such as bonds or real estate, which can provide stability and income during market downturns.

Sectors Info

  • Technology
    30%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Telecommunications
    9%
  • Industrials
    9%
  • Health Care
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is notably concentrated in technology (30%), which may lead to increased volatility during tech market fluctuations. The portfolio includes a broad range of sectors, but the heavy tech weighting deviates from typical benchmarks. This concentration could be beneficial in tech booms but risky during downturns. To balance this, consider gradually increasing exposure to underrepresented sectors like utilities or healthcare, which can offer stability and defensive qualities.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The geographic allocation is heavily skewed towards North America (81%), limiting global diversification. While this reflects a strong belief in the US market, it may expose the portfolio to regional risks. Compared to global benchmarks, which often have more balanced geographic exposure, this portfolio is under-diversified internationally. Consider increasing exposure to emerging markets or other developed regions to enhance diversification and capture global growth opportunities.

Market capitalization Info

  • Mega-cap
    47%
  • Large-cap
    30%
  • Mid-cap
    16%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio is predominantly invested in large-cap stocks, with 47% in mega caps and 30% in big caps. While large-cap stocks provide stability and lower volatility, the limited exposure to small and micro caps (5% combined) may restrict growth potential. Compared to a diversified benchmark, this portfolio is less exposed to the high-growth potential of smaller companies. Consider gradually increasing small-cap exposure to capture potential growth while maintaining stability.

Redundant positions Info

  • SPDR® Portfolio S&P 500 Growth ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the SPDR® Portfolio S&P 500 Growth ETF and Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can amplify losses. To enhance diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the existing holdings, thus improving risk management.

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 be optimized using the Efficient Frontier to achieve a better risk-return ratio. This involves adjusting the current assets' allocation to maximize returns for a given level of risk. However, optimization is limited to the existing assets and may not address diversification or other objectives. Consider reviewing the correlation and sector concentration to further enhance the portfolio's efficiency, ensuring it aligns with your risk tolerance and investment goals.

Dividends Info

  • SPDR® Portfolio S&P 500 Growth ETF 0.60%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.14%

With a total dividend yield of 1.14%, the portfolio provides a modest income stream. The Vanguard FTSE All-World ex-US Index Fund ETF Shares offers the highest yield at 1.50%. While dividends contribute to total returns, this portfolio is more growth-oriented. For those seeking income, consider increasing the allocation to higher-yielding assets or dividend-focused funds. This could provide a steady income stream, especially useful for investors nearing retirement.

Ongoing product costs Info

  • SPDR® Portfolio S&P 500 Growth ETF 0.04%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.04%. This is well below the industry average, supporting better long-term performance by minimizing cost drag. Low fees are crucial for maximizing net returns, particularly over extended investment horizons. Maintaining this cost efficiency is advantageous, but always review expense ratios periodically, ensuring they remain competitive and aligned with investment goals.

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