Balanced Portfolio with High Diversification and Strong Technology Focus for Moderate Risk Tolerance Investors

Report created on Dec 4, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio consists of three ETFs, with a strong emphasis on the Vanguard S&P 500 ETF, which makes up half of the allocation. The rest is divided between the Vanguard Total International Stock Index Fund ETF Shares and the Invesco NASDAQ 100 ETF. This composition indicates a well-diversified approach, aiming to capture growth from both domestic and international markets. The heavy weighting in the S&P 500 reflects a focus on stability and long-term growth, while the international fund adds global exposure. The NASDAQ 100 allocation suggests a tilt towards tech-driven growth.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate of 13.65%. This impressive growth comes with a maximum drawdown of 27.37%, reflecting the inherent volatility of equity markets. The portfolio's performance is concentrated, with 90% of returns generated in just 19 days. This highlights the importance of staying invested during volatile periods to capture significant gains. The historical performance suggests a strong growth potential, but investors should be prepared for periods of volatility.

Projection Info

A Monte Carlo simulation, using 1,000 scenarios, shows a range of potential outcomes for this portfolio. With a hypothetical initial investment, the 50th percentile outcome suggests a 462.67% return, while the 5th percentile indicates a 95.88% return. The high count of simulations with positive returns (992 out of 1,000) and an annualized return of 14.53% suggest a favorable outlook. However, these projections are not guarantees and serve as a tool to understand potential risks and rewards.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted in stocks, with 99.5% of the allocation in equities. This concentration in a single asset class can lead to significant growth but also exposes the portfolio to market volatility. The minimal allocation to cash and other categories suggests a focus on maximizing returns through equity investments. While this approach can be beneficial for growth, it may be prudent to consider diversifying into other asset classes to mitigate risk, depending on individual risk tolerance.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Health Care
    9%
  • Industrials
    9%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    3%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio's sector allocation is dominated by technology, which accounts for over 30% of the total. This indicates a strong focus on growth sectors, which can lead to higher returns but also increased volatility. Other significant sectors include financial services, consumer cyclicals, and communication services. The presence of 11 sectors, each with less than 2% allocation, suggests broad diversification. To enhance stability, consider balancing sector exposure to reduce reliance on technology.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, with over 71% allocation. This reflects a strong home bias, typical for U.S.-based investors. However, there's a notable international presence, with exposure to developed Europe, emerging Asia, and Japan. This global diversification can help mitigate regional risks and capture growth opportunities worldwide. To further enhance diversification, consider increasing exposure to underrepresented regions, aligning with global economic trends.

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's optimization chart suggests potential for improvement by adjusting along the efficient frontier. Moving towards a riskier profile could involve increasing allocations to high-growth sectors or regions, while a more conservative approach might include diversifying into bonds or other low-risk assets. However, before optimizing, it's crucial to ensure alignment with personal financial goals and risk tolerance. Consider reviewing asset class allocation and sector exposure to enhance diversification and manage risk effectively.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.59%

The portfolio's dividend yield stands at 1.59%, providing a modest income stream. The Vanguard Total International Stock Index Fund ETF Shares contributes the highest yield at 2.9%, followed by the Vanguard S&P 500 ETF at 1.2%, and the Invesco NASDAQ 100 ETF at 0.6%. This yield can enhance total returns, particularly in volatile markets. For investors seeking income, consider increasing allocations to higher-yielding assets, balancing growth and income objectives.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The total expense ratio (TER) of the portfolio is 0.07%, indicating a cost-effective investment strategy. The Vanguard S&P 500 ETF's low cost of 0.03% contributes significantly to this efficiency. Keeping investment costs low is crucial for maximizing net returns over time. While the current cost structure is favorable, regularly reviewing and optimizing costs can further enhance performance. Consider exploring additional low-cost investment options to maintain or improve cost efficiency.

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