Balanced Growth Portfolio with High Risk and Technology Focus for Canadian Investors
Report created on Dec 3, 2024Risk profile
5/7
Diversification profile
3/5
Positions
-
TE TD Global Technology Leaders Index ETF
TEC - CA87241G1000 50.00% -
BT Purpose Bitcoin CAD ETF Currency Hedged Units
BTCC - CA74642C1023 25.00% -
VF Vanguard S&P 500 Index ETF
VFV - CA92205Y1051 25.00%
The portfolio is composed of three ETFs, with a heavy focus on technology and cryptocurrency. The TD Global Technology Leaders Index ETF makes up 50% of the portfolio, indicating a strong emphasis on tech stocks. The Purpose Bitcoin CAD ETF represents 25%, adding a layer of high-risk, high-reward potential. Vanguard S&P 500 Index ETF takes the remaining 25%, providing a broader market exposure. This composition suggests a growth-oriented strategy, with a moderate level of diversification across different asset classes and sectors. However, the substantial allocation to technology and cryptocurrency implies higher volatility.
Growth
Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 21.0%. However, it has also experienced significant volatility, with a maximum drawdown of -40.2%. This means that while the portfolio has the potential for substantial returns, it also carries the risk of considerable losses. The fact that 90% of returns are concentrated in just 16 days highlights the importance of timing in this investment strategy. While past performance can be an indicator, it's not a guarantee of future returns, so it's crucial to maintain a long-term perspective.
Projection
Using a Monte Carlo simulation with 1,000 simulations, the portfolio's future performance was projected. This method provides a range of possible outcomes based on historical data and random variables. The results show a wide range of potential returns, with the 5th percentile at -12.14% and the 50th percentile at 724.44%. The 67th percentile projects a return of 1,411.28%, indicating significant upside potential. However, the high variability also means there's a risk of negative returns. The annualized return across all simulations stands at 24.21%, suggesting optimistic future growth, albeit with inherent risks.
Asset classes
- US Equity 70%
- Other 25%
The portfolio is primarily invested in US equities, accounting for 69.67% of the allocation. This reflects a strong bias towards the US market, which could lead to concentration risk. The remaining 25% is categorized as "Other," which includes cryptocurrency, adding diversification but also volatility. A small portion is in cash, providing liquidity but negligible returns. Given the high exposure to equities, the portfolio is positioned for growth, but it's important to consider the potential for significant fluctuations in value, especially during market downturns.
Sectors
- Technology 41%
- Telecommunications 10%
- Consumer Discretionary 8%
- Financials 6%
- Health Care 3%
- Industrials 3%
- Consumer Staples 1%
- Real Estate 1%
- Energy 1%
- Utilities 1%
Sector allocation is heavily skewed towards technology, comprising 41.02% of the portfolio. This concentration indicates a strong belief in the growth potential of the tech industry. Other sectors like Communication Services and Consumer Cyclicals also have notable allocations, at 9.87% and 8.17% respectively. While this focus can drive substantial returns during tech booms, it also exposes the portfolio to sector-specific risks. Diversifying into other sectors could mitigate this risk and create a more balanced portfolio, reducing vulnerability to downturns in the technology sector.
Regions
- North America 70%
- Europe Developed 3%
- Japan 2%
Geographically, the portfolio is predominantly invested in North America, with a 70.13% allocation. This focus on North American markets suggests a strong confidence in the region's economic prospects. However, the limited exposure to other geographic areas could mean missed opportunities in emerging markets or other developed regions. A more geographically diversified portfolio might reduce risk and enhance returns by capturing growth in different parts of the world. Exploring investments in Europe, Asia, or other regions could provide additional diversification benefits.
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 that there is room for improvement in balancing risk and return. By moving along the efficient frontier, investors can achieve a more optimal portfolio. For those seeking higher returns, increasing exposure to riskier assets could be considered. Conversely, for a more conservative approach, diversifying into safer asset classes like bonds may reduce volatility. It's important to align the portfolio with individual risk tolerance and financial goals. Before making changes, focus on understanding the portfolio's current risk profile and potential areas for diversification.
Dividends
- TD Global Technology Leaders Index ETF 0.10%
- Vanguard S&P 500 Index ETF 0.70%
- Weighted yield (per year) 0.22%
The portfolio's dividend yield is relatively low, with a total yield of 0.22%. The TD Global Technology Leaders Index ETF contributes a minimal 0.1%, while the Vanguard S&P 500 Index ETF offers a slightly higher 0.7%. This indicates that the portfolio is primarily focused on capital appreciation rather than income generation. For investors seeking regular income, increasing exposure to dividend-paying stocks or funds could be beneficial. However, the current composition aligns with a growth-oriented strategy, where the primary goal is to maximize capital gains.
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