A growth-focused portfolio with high US equity exposure and low diversification

Report created on Dec 24, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards US equities, with 80% in the Vanguard S&P 500 CAD hedged ETF and 20% in the Invesco NASDAQ 100 Index ETF. This composition leans heavily on large-cap US stocks, providing significant exposure to established companies. While this can offer stability and growth potential, it lacks diversification across other asset classes like bonds or international equities. A more balanced portfolio might include a mix of asset classes to spread risk and potentially enhance returns over time.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 13.74%, indicating robust performance over time. However, it experienced a significant maximum drawdown of -33.89%, highlighting its vulnerability during market downturns. This performance suggests that while the portfolio can deliver substantial returns, it also carries a higher risk, especially during volatile periods. Investors should consider their risk appetite and whether they can tolerate such downturns in exchange for the potential high returns.

Projection Info

The forward projection using Monte Carlo simulation, which runs numerous scenarios based on historical data to estimate future outcomes, shows a promising outlook. The 50th percentile projection suggests a potential portfolio value increase of 628.14%. However, it's important to remember that these projections are based on past data and are not guaranteed. While the simulations indicate a high chance of positive returns, investors should be cautious and consider diversifying to mitigate unforeseen risks.

Asset classes Info

  • US Equity
    79%

The portfolio is concentrated in a single asset class: US equities. This heavy reliance on one asset class can limit diversification benefits, as the portfolio's performance is closely tied to the US stock market's fluctuations. Diversifying across additional asset classes, like bonds or international equities, could help reduce risk and smooth returns. By spreading investments across different asset classes, investors can potentially protect against downturns in any single market or region.

Sectors Info

  • Technology
    36%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Financials
    10%
  • Health Care
    10%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The sector allocation is notably skewed towards technology, which constitutes 36.33% of the portfolio. While tech stocks can offer high growth potential, they also tend to be more volatile, especially during periods of economic uncertainty or rising interest rates. The portfolio's limited exposure to other sectors, such as basic materials and real estate, further underscores its lack of diversification. Investors might consider adjusting sector weights to achieve a more balanced exposure, potentially reducing volatility.

Regions Info

  • North America
    80%

Geographically, the portfolio is predominantly focused on North America, with 79.52% allocation, leaving minimal exposure to Europe and Asia. This concentration may increase vulnerability to regional economic downturns or geopolitical events. Diversifying across more geographic regions can help mitigate such risks and capture growth opportunities in emerging markets. A more globally diversified portfolio can benefit from different economic cycles and reduce reliance on the performance of a single region.

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 current allocation may not be fully optimized for the best risk-return balance on the Efficient Frontier, a concept that identifies the best possible risk-return ratio for a given set of investments. By adjusting the weights of existing assets, the portfolio could potentially achieve a more favorable risk-return profile. While the current allocation supports growth, exploring optimization strategies could enhance returns while managing risk more effectively.

Dividends Info

  • Invesco NASDAQ 100 Index ETF 0.40%
  • Vanguard S&P 500 CAD hedged 0.80%
  • Weighted yield (per year) 0.72%

The portfolio's dividend yield is relatively modest at 0.72%, with the Vanguard S&P 500 CAD hedged ETF contributing 0.8% and the Invesco NASDAQ 100 Index ETF 0.4%. While dividends provide a steady income stream, they are not the primary focus of this growth-oriented portfolio. Investors seeking higher income might explore adding dividend-focused investments. However, for those prioritizing capital appreciation, the current yield is aligned with the portfolio's growth objectives.

Ongoing product costs Info

  • Invesco NASDAQ 100 Index ETF 0.20%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a total expense ratio of 0.04% for the Vanguard S&P 500 CAD hedged ETF and 0.2% for the Invesco NASDAQ 100 Index ETF. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode gains over time. This cost efficiency supports the portfolio's growth potential, allowing more of the investor's money to remain invested and compound over time. Maintaining low costs is a positive aspect of this portfolio.

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