Balanced Portfolio with Strong US Focus and Technology Overweight Suitable for Moderate Risk Tolerance

Report created on Dec 4, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of three ETFs, with a significant allocation towards the Vanguard S&P 500 ETF, making up 60% of the portfolio. The Invesco NASDAQ 100 ETF and the Vanguard Total International Stock Index Fund ETF Shares each hold a 20% share. This composition indicates a strong focus on US equities, particularly large-cap stocks, with a sprinkling of international exposure. Such a structure provides a solid foundation, but it might be worth considering a bit more international diversification to balance potential regional risks.

Growth Info

Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 14.49%. The max drawdown of -27.06% is a reminder of the volatility associated with equities, particularly during market downturns. This performance suggests a robust recovery capability, but the concentrated US exposure could mean vulnerability to domestic market fluctuations. To maintain strong performance, it's crucial to stay informed about US market conditions and consider diversifying further to mitigate potential risks.

Projection Info

Using a Monte-Carlo simulation, which models potential future outcomes based on historical data, the portfolio shows promising forward projections. A hypothetical initial investment could see a median growth of 464.96%, with a high probability of positive returns, as 996 out of 1,000 simulations were positive. This indicates a favorable risk-return profile, but it's essential to remain cautious as projections are not guarantees. Regularly reviewing and adjusting the portfolio in line with changing market conditions is recommended for sustained growth.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with an allocation of 99.64% in equities. This suggests a focus on capital appreciation rather than income generation. While this can lead to higher returns, it also exposes the portfolio to significant market volatility. Introducing a small allocation to bonds or other fixed-income securities could help reduce risk and provide a more balanced approach, especially in times of market uncertainty. This could also align better with a moderate risk tolerance.

Sectors Info

  • Technology
    33%
  • Financials
    12%
  • Consumer Discretionary
    11%
  • Telecommunications
    10%
  • Health Care
    10%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation reveals a heavy tilt towards technology, which accounts for 32.62% of the portfolio. Other significant sectors include financial services and consumer cyclicals. While the technology sector has been a strong performer, its high concentration could lead to increased volatility. A more balanced sector allocation could help mitigate sector-specific risks. Consider exploring opportunities in underrepresented sectors to enhance diversification and reduce the impact of sector-specific downturns.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with 80.71% of assets allocated there. While this reflects a strong belief in the US market, it also exposes the portfolio to regional risks. The remaining assets are spread across Europe, Asia, and other regions, but in smaller proportions. To achieve a more globally diversified portfolio, consider increasing exposure to international markets. This could help cushion the portfolio against potential downturns in the US market.

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 while the current portfolio is balanced, there is room for improvement along the efficient frontier. By adjusting the allocation towards less correlated assets or introducing fixed-income securities, one could achieve a more conservative risk profile. Conversely, increasing exposure to equities could enhance returns but with added risk. Before making changes, focus on aligning the portfolio with personal risk tolerance and long-term financial goals to ensure a suitable investment strategy.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.42%

The portfolio's dividend yield stands at 1.42%, with contributions from all three ETFs. The Vanguard Total International Stock Index Fund ETF Shares offers the highest yield at 2.9%, while the Invesco NASDAQ 100 ETF provides the lowest at 0.6%. While dividends can provide a steady income stream, the current yield is relatively low. For those seeking higher income, exploring dividend-focused investments could be beneficial. However, it's important to balance income generation with growth potential.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The total expense ratio (TER) for the portfolio is 0.06%, which is quite low and indicates cost-effective management. The Vanguard S&P 500 ETF has the lowest individual cost at 0.03%, while the Invesco NASDAQ 100 ETF is slightly higher at 0.15%. Keeping investment costs low is crucial, as high fees can erode returns over time. It's important to periodically review the expense ratios of current and potential investments to ensure they remain competitive and aligned with investment goals.

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