A balanced portfolio with high tech exposure and limited international diversification

Report created on Jan 25, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily weighted towards ETFs, with a significant portion in the Invesco NASDAQ 100 ETF and Vanguard S&P 500 ETF. It also includes individual stocks like Apple and Boeing, with a minor allocation to commodities and bonds. This composition reflects a focus on U.S. equities, particularly large-cap stocks, which align with a balanced risk profile. This setup can provide growth potential while maintaining some stability through diversification across different asset types. However, the portfolio's concentration in U.S. equities may limit its exposure to global opportunities, which could be a consideration for enhancing diversification.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 14.44%, outperforming many traditional benchmarks. This impressive growth rate indicates robust historical performance, driven by the strong returns from U.S. equities, particularly in the tech sector. However, the portfolio also experienced a maximum drawdown of -25.86%, highlighting its susceptibility to market volatility. This performance underscores the importance of balancing growth potential with risk management. Investors should be aware that while past performance is encouraging, it does not guarantee future results, and maintaining a diversified portfolio is crucial to managing potential downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests a wide range of possibilities for this portfolio. With 1,000 simulations, the 50th percentile predicts a potential 326.9% increase, while the 5th percentile shows a 16.6% increase. This indicates a favorable expected return, but with inherent uncertainty. The simulation demonstrates the portfolio's potential for growth, but investors should be cautious as projections are based on historical trends that may not repeat. It's essential to regularly review and adjust the portfolio to align with changing market conditions and personal investment goals.

Asset classes Info

  • Stocks
    87%
  • Other
    11%
  • Cash
    1%
  • Bonds
    1%

The portfolio is predominantly composed of stocks (87%), with minimal allocations to other asset classes like bonds and commodities. This heavy equity weighting suggests a focus on growth, but it may lack the risk mitigation benefits that more diversified asset classes can provide. Compared to typical balanced portfolios, this one is more equity-centric. To enhance diversification, consider increasing exposure to bonds or other non-correlated assets, which can potentially reduce volatility and provide more stable returns over time, particularly during periods of market turbulence.

Sectors Info

  • Technology
    36%
  • Industrials
    13%
  • Consumer Discretionary
    8%
  • Telecommunications
    7%
  • Financials
    7%
  • Health Care
    6%
  • Consumer Staples
    5%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

The portfolio is heavily concentrated in the technology sector, accounting for 36% of the allocation. This sectoral focus can drive significant growth, especially in a tech-driven market. However, it also introduces higher volatility, as tech stocks can be sensitive to interest rate changes and market sentiment. Other sectors like industrials and consumer cyclicals provide some balance, but the overall sectoral diversification is limited. To mitigate sector-specific risks, consider diversifying into sectors that traditionally perform well during different economic cycles, such as consumer defensive or healthcare.

Regions Info

  • North America
    86%
  • Europe Developed
    1%

With 86% of assets allocated to North America, the portfolio is heavily skewed towards the U.S. market. This concentration provides exposure to a stable and historically strong market but limits global diversification. Exposure to international markets, particularly emerging economies, is minimal. Geographic diversification can help reduce regional risks and tap into growth opportunities in other parts of the world. Consider gradually increasing allocations to developed and emerging markets to balance the portfolio's geographic exposure and potentially enhance long-term returns.

Market capitalization Info

  • Mega-cap
    43%
  • Large-cap
    33%
  • No data
    12%
  • Mid-cap
    10%
  • Small-cap
    1%

The portfolio is predominantly invested in mega-cap (43%) and large-cap (33%) stocks, providing stability and lower volatility compared to smaller companies. This market capitalization distribution aligns with a balanced risk profile, offering growth potential through established companies. However, the limited allocation to small-cap stocks may restrict exposure to higher growth opportunities. To achieve a more balanced market capitalization distribution, consider increasing exposure to small and mid-cap stocks, which can offer diversification benefits and potentially higher returns over the long term.

Redundant positions Info

  • iShares MSCI World ETF
    Invesco NASDAQ 100 ETF
    Vanguard S&P 500 Growth Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the U.S. equity ETFs. This high correlation means these assets tend to move in the same direction, reducing diversification benefits. During market downturns, highly correlated assets may amplify portfolio volatility. Diversification is key to managing risk, so consider replacing some of these correlated ETFs with assets that have lower correlations, such as international equities or bonds. This adjustment can help reduce overall portfolio risk and improve resilience against market fluctuations.

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 could be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. However, the presence of highly correlated assets limits diversification benefits, which is crucial for effective optimization. Before optimizing, focus on reducing overlaps by replacing correlated assets with those offering different risk-return profiles. This step can improve the portfolio's efficiency, ensuring a better balance between risk and potential returns. Remember, optimization is about maximizing returns for a given level of risk, not just diversification.

Dividends Info

  • Apple Inc 0.40%
  • iShares Core High Dividend ETF 3.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • iShares 20+ Year Treasury Bond ETF 4.30%
  • iShares MSCI World ETF 0.70%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 0.80%

The portfolio's dividend yield is relatively low at 0.80%, with the iShares Core High Dividend ETF contributing the highest yield at 3.60%. While dividends are not a primary focus, they can provide a steady income stream and enhance total returns, especially in low-growth environments. Investors seeking income may consider increasing allocations to high-dividend-paying assets. However, it's essential to balance dividend yield with growth potential, ensuring that the overall portfolio aligns with long-term investment objectives and risk tolerance.

Ongoing product costs Info

  • SPDR® Gold Shares 0.40%
  • iShares Core High Dividend ETF 0.08%
  • Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF 0.59%
  • Invesco NASDAQ 100 ETF 0.15%
  • iShares 20+ Year Treasury Bond ETF 0.15%
  • iShares MSCI World ETF 0.24%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.11%

The portfolio boasts a low total expense ratio (TER) of 0.11%, which is favorable for long-term performance. Lower costs mean more of the investment returns are retained, compounding over time. This efficient cost structure aligns well with best practices, supporting better net returns. While the costs are already low, investors should continue to monitor expense ratios, especially if considering new investments. Keeping costs in check is a simple yet effective way to enhance portfolio returns without taking on additional risk.

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