A balanced portfolio with a strong tech focus and moderate international diversification

Report created on Dec 13, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs, particularly the Invesco NASDAQ 100 and Vanguard S&P 500, which together make up 45% of the portfolio. These ETFs provide broad exposure to large-cap U.S. stocks. Individual stocks, such as Apple, Amazon, and Alphabet, represent notable single-company investments. This composition suggests a focus on growth through established tech giants and a reliance on market-weighted ETFs. Balancing these with smaller allocations in real estate and international markets could diversify risk. Consider increasing exposure to underrepresented sectors or regions to reduce reliance on U.S. tech stocks.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 16.83%. However, it has also experienced a maximum drawdown of -23.65%, indicating potential volatility. This performance suggests that while the portfolio has the potential for high returns, it is also susceptible to significant downturns. Understanding past performance helps set realistic expectations, but remember that historical returns do not guarantee future results. To potentially mitigate drawdowns, consider incorporating assets with lower volatility or those that perform well in different market conditions.

Projection Info

Using a Monte Carlo simulation, which runs thousands of potential future scenarios based on historical data, the portfolio shows a median projected return of 353.6%. While promising, the 5th percentile projects a negative return of -19.15%, highlighting potential risks. This simulation provides a range of outcomes, emphasizing the uncertainty inherent in investing. While the median outcome is positive, it's crucial to prepare for less favorable scenarios. Diversifying further or adjusting asset allocations can help improve the portfolio's resilience against adverse market conditions.

Asset classes Info

  • Stocks
    95%
  • Real Estate
    4%
  • Other
    1%

The portfolio is predominantly invested in stocks, accounting for over 94% of the total allocation. Real estate and other asset classes make up a small portion. This concentration in equities suggests a growth-oriented strategy but also increases exposure to market volatility. A more balanced allocation across different asset classes, such as bonds or commodities, could provide more stability. This diversification can help cushion against market downturns and offer a smoother return profile over time.

Sectors Info

  • Technology
    30%
  • Consumer Discretionary
    17%
  • Telecommunications
    12%
  • Real Estate
    9%
  • Consumer Staples
    8%
  • Health Care
    5%
  • Energy
    5%
  • Industrials
    4%
  • Financials
    4%
  • Basic Materials
    4%
  • Utilities
    1%

Technology and consumer cyclicals dominate the sectoral allocation, making up nearly half of the portfolio. This concentration can lead to significant exposure to sector-specific risks, such as regulatory changes or technological disruptions. While these sectors have historically driven growth, diversifying into underrepresented sectors like healthcare or utilities could reduce risk and enhance stability. Rebalancing the portfolio to include a broader mix of sectors might help achieve more consistent returns.

Regions Info

  • North America
    86%
  • Latin America
    7%
  • Europe Developed
    3%
  • Japan
    1%
  • Asia Emerging
    1%
  • Asia Developed
    1%

The portfolio is heavily weighted towards North America, with over 86% of assets allocated there. This geographic concentration exposes the portfolio to regional economic and political risks. While North America has historically been a strong performer, diversifying into other regions could provide exposure to different growth opportunities and reduce risk. Increasing allocations to emerging markets or developed regions outside North America could enhance the portfolio's global diversification and potential return profile.

Redundant positions Info

  • Vanguard Total International Stock Index Fund ETF Shares
    Vanguard FTSE Developed Markets Index Fund ETF Shares
    High correlation

Highly correlated assets, like the Vanguard Total International Stock Index Fund and the Vanguard FTSE Developed Markets Index Fund, indicate overlapping exposure. This correlation suggests limited diversification benefits within these holdings. Diversification is key for risk management, as uncorrelated assets can reduce overall portfolio volatility. Consider replacing highly correlated assets with those that have different market exposures or risk profiles to improve diversification and potentially enhance returns.

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.

Optimizing the portfolio using the Efficient Frontier could enhance its risk-return ratio. Currently, the portfolio has overlapping assets that do not provide diversification benefits. By reallocating these assets, the portfolio could achieve a higher expected return of 27.78% with a similar risk level. The Efficient Frontier helps identify the best possible allocation for the desired risk, focusing on maximizing returns. Regularly reviewing and adjusting the portfolio can ensure it remains aligned with investment goals.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class A 0.20%
  • Johnson & Johnson 3.40%
  • The Coca-Cola Company 2.30%
  • 3M Company 2.60%
  • Nike Inc 1.40%
  • Realty Income Corp 5.70%
  • Petroleo Brasileiro Petrobras SA ADR 10.50%
  • PepsiCo Inc 2.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vale SA ADR 9.70%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.88%

The portfolio's dividend yield is 1.88%, with contributions from companies like Johnson & Johnson and Realty Income Corp. Dividends provide a steady income stream and can be a buffer during market downturns. While growth stocks dominate the portfolio, increasing exposure to dividend-paying stocks could enhance income stability. Balancing growth with income-generating assets might improve the portfolio's risk-return profile, especially for investors seeking regular cash flow.

Ongoing product costs Info

  • SPDR® Gold Shares 0.40%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio is relatively low at 0.05%, thanks to cost-effective ETFs like the Vanguard S&P 500. Lower costs can significantly enhance long-term returns by reducing the drag on performance. While the current costs are favorable, continually reviewing and minimizing expenses is crucial. Consider replacing higher-cost assets with lower-cost alternatives that offer similar exposure to maintain cost efficiency and maximize net returns.

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