Balanced Risk Portfolio with Strong U.S. Focus and Broad Diversification Across Sectors and Geographies

Report created on Dec 2, 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 is composed of four ETFs, with a significant concentration in the Vanguard S&P 500 ETF, making up over 72% of the holdings. This suggests a strong emphasis on large-cap U.S. stocks. Complementing this, there's a mix of international exposure through the Vanguard Total International Stock Index Fund ETF and the Global X MSCI Argentina ETF. The inclusion of the Vanguard Russell 2000 Index Fund ETF adds a small-cap U.S. dimension. This composition indicates a balanced approach with a preference for U.S. equities, while still maintaining some international diversification.

Growth Info

Historically, the portfolio has delivered a solid compound annual growth rate (CAGR) of 13.19%, which is impressive. However, it has experienced a maximum drawdown of -35.09%, indicating vulnerability during market downturns. This performance suggests that while the portfolio can generate strong returns, it also carries significant risk, particularly in volatile market conditions. The concentrated exposure to U.S. equities, particularly large-cap, has likely driven this performance. To potentially mitigate future drawdowns, consider diversifying further or implementing risk management strategies.

Projection Info

The Monte Carlo simulation, which uses random sampling to predict future performance, provides an optimistic outlook with a 50th percentile return of 326.93% and a 67th percentile return of 521.12%. This suggests a high probability of positive returns, with 957 out of 1,000 simulations showing gains. The annualized return across simulations is 13.54%, aligning closely with historical performance. These projections highlight the portfolio's potential for strong long-term growth, although they come with inherent uncertainty. Maintaining a diversified approach and reviewing asset allocation regularly could help in achieving these optimistic outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising over 99.5% of the holdings. This indicates a high-risk, high-reward strategy, as equities typically offer greater potential returns but with increased volatility. The minimal allocation to cash and other asset classes suggests limited downside protection. For a more balanced risk approach, consider incorporating fixed-income securities, which can provide stability and income during market fluctuations. Diversifying into other asset classes could enhance the portfolio's risk-adjusted returns and offer a buffer against equity market downturns.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Health Care
    11%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Utilities
    3%
  • Basic Materials
    3%
  • Real Estate
    3%

The sector allocation is diverse, with significant exposure to Technology, Financial Services, and Consumer Cyclicals. Technology, at nearly 27%, is the largest sector, reflecting a growth-oriented strategy. This sectoral spread suggests an attempt to capture growth across various industries. However, the heavy tech weighting could lead to increased volatility. To reduce sector-specific risk, consider rebalancing to achieve a more even distribution across sectors. This can help mitigate the impact of downturns in any single sector and enhance overall portfolio stability.

Regions Info

  • North America
    82%
  • Latin America
    6%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, with over 82% allocation, primarily through U.S. equities. While this provides exposure to one of the world's most robust markets, it also introduces concentration risk. The remaining exposure is spread across Latin America, Europe, Asia, and other regions, offering some diversification. To further reduce geographic risk, consider increasing allocations to underrepresented regions. This could help capture growth opportunities in emerging markets and provide a hedge against potential downturns in the U.S. 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 indicates potential for improvement by shifting along the efficient frontier. This involves balancing risk and return to achieve an optimal mix. For those seeking higher returns, consider increasing exposure to growth-oriented assets, while conservative investors might add more fixed-income securities to reduce volatility. Before optimizing, ensure the current portfolio aligns with financial goals and risk tolerance. Adjustments can be made incrementally to maintain a balanced approach. Regularly reviewing and rebalancing the portfolio can help achieve desired outcomes without drastically altering the risk profile.

Dividends Info

  • Global X MSCI Argentina ETF 0.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Russell 2000 Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.40%

The portfolio offers a modest dividend yield of 1.4%, with contributions from each ETF. The Vanguard Total International Stock Index Fund ETF provides the highest yield at 3.0%, while the Global X MSCI Argentina ETF has the lowest at 0.9%. This yield can provide a steady income stream, complementing capital appreciation. However, the overall yield is relatively low, reflecting the growth-oriented nature of the portfolio. To enhance income, consider reallocating to dividend-focused investments, which can offer higher yields and stability, especially during periods of market uncertainty.

Ongoing product costs Info

  • Global X MSCI Argentina ETF 0.59%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Russell 2000 Index Fund ETF Shares 0.10%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

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