A balanced portfolio with a tech focus and strong potential for growth but limited geographic diversity

Report created on Jan 6, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of a mix of ETFs, with a significant 30% allocation to short-term Treasury bonds, providing stability and liquidity. The remaining 70% is invested in equities, favoring growth-oriented sectors. Compared to a typical balanced portfolio, this one leans heavily on equities, especially in technology. While this composition may suit growth objectives, it could expose the portfolio to higher volatility. To align more closely with a traditional balanced benchmark, consider diversifying into other asset classes, such as international equities or fixed income, to mitigate risk and improve resilience.

Growth Info

Historically, the portfolio has demonstrated a strong CAGR of 14.65%, outperforming typical balanced benchmarks. However, it also experienced a significant max drawdown of -26.45%, indicating that while returns are high, so is the risk. This performance suggests that the portfolio thrives in bullish markets but may suffer during downturns. It’s important to remember that past performance does not guarantee future results. To enhance stability, consider incorporating more defensive assets or diversifying across less correlated sectors to cushion against potential future drawdowns.

Projection Info

Forward projections using Monte Carlo simulations reveal an optimistic outlook, with a median expected growth of 661.94%. However, it's crucial to understand that these projections rely heavily on historical data, which may not predict future outcomes accurately. The simulations show a wide range of potential outcomes, emphasizing the portfolio's inherent risk. To manage expectations and prepare for various scenarios, consider stress-testing the portfolio against different economic conditions and adjusting allocations to balance growth potential with risk mitigation.

Asset classes Info

  • Stocks
    70%
  • Cash
    30%

The portfolio is heavily weighted towards equities at nearly 70%, with the remainder in cash equivalents. This allocation aligns with a growth-focused strategy but may lack the diversification benefits of including other asset classes like fixed income or international equities. Compared to a typical balanced benchmark, the portfolio is less diversified across asset classes, potentially increasing risk. To enhance diversification and reduce volatility, consider adding exposure to other asset classes that can provide balance and stability, especially during market downturns.

Sectors Info

  • Technology
    46%
  • Consumer Discretionary
    5%
  • Telecommunications
    5%
  • Health Care
    4%
  • Financials
    3%
  • Consumer Staples
    2%
  • Industrials
    2%
  • Energy
    1%
  • Basic Materials
    1%

The portfolio is concentrated in technology, comprising 45.73%, which can drive growth but also increase volatility, especially during tech sector downturns. This allocation is significantly higher than common benchmarks, which typically have a more balanced sector distribution. While the tech focus leverages growth opportunities, it may also expose the portfolio to sector-specific risks. To mitigate these risks, consider reallocating some investments into underrepresented sectors, such as healthcare or consumer staples, which can provide defensive characteristics and enhance overall diversification.

Regions Info

  • North America
    66%
  • Asia Developed
    2%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with minimal exposure to other regions. This concentration may limit the benefits of global diversification, potentially increasing vulnerability to regional economic downturns. Compared to common benchmarks, the portfolio underrepresents international markets, which could provide growth opportunities and risk diversification. To enhance geographic diversification, consider increasing allocations to developed and emerging markets outside North America, aligning the portfolio with global economic trends and reducing regional risk exposure.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Invesco NASDAQ 100 ETF
    Vanguard Information Technology Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among the tech-focused ETFs, which may limit diversification benefits. When assets move together, the portfolio can experience amplified volatility during market downturns. This correlation suggests that while the portfolio may perform well in bullish tech markets, it could suffer significant losses during sector-specific downturns. To improve diversification, consider reducing exposure to correlated assets and incorporating ETFs from different sectors or asset classes, which can help balance risk and enhance overall portfolio resilience.

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, which suggests a more efficient allocation with a higher expected return of 2.86% at the same risk level. This optimization focuses on achieving the best possible risk-return ratio based on current assets. However, it doesn't necessarily account for other goals like diversification or income. To enhance efficiency, consider reallocating assets to align with the Efficient Frontier, while also ensuring that other investment objectives, such as diversification and income, are met.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • iShares® 0-3 Month Treasury Bond ETF 5.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Weighted yield (per year) 2.13%

The portfolio's dividend yield stands at 2.13%, with the Schwab U.S. Dividend Equity ETF contributing the most. While this yield provides a modest income stream, it's relatively low compared to income-focused portfolios. Dividends can offer stability and cash flow, especially during volatile markets. For investors seeking higher income, consider increasing exposure to dividend-focused ETFs or stocks. However, it's important to balance the pursuit of yield with growth objectives, ensuring that dividend strategies align with overall investment goals.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Weighted costs total (per year) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, which is impressively low and supports better long-term performance by minimizing costs. This cost efficiency is beneficial, as high fees can erode returns over time. Compared to industry averages, this TER is competitive, indicating that the portfolio is well-structured in terms of cost management. To maintain this advantage, continue monitoring expense ratios and consider replacing higher-cost ETFs with lower-cost alternatives if they offer similar exposure and performance potential.

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