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A balanced portfolio with strong diversification but high correlation among core assets

Report created on Apr 14, 2025

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 heavily weighted towards equities, with 99% in stocks and a small cash position. It includes a mix of ETFs and individual stocks, with a notable emphasis on broad market indices. This composition provides a solid foundation for diversified growth but may benefit from the inclusion of other asset classes like bonds for risk mitigation. Comparing this to a balanced benchmark, the portfolio leans more aggressively towards equities. Consider introducing a small allocation to fixed-income assets to better align with a balanced risk profile.

Growth Info

Historically, this portfolio has performed well, with a CAGR of 11.88%. This indicates strong growth potential, especially when compared to typical benchmarks. However, the maximum drawdown of -25.82% highlights potential volatility during market downturns. While past performance is no guarantee of future results, it provides a useful benchmark for evaluating risk and reward. To mitigate future drawdowns, consider diversifying into less volatile asset classes or sectors, especially if approaching a shorter investment horizon.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With a median return of 409.9%, the portfolio shows promising growth potential. However, the 5th percentile projection of 59.5% underscores the uncertainty inherent in market predictions. While simulations provide insights, they are not foolproof. Regularly reviewing and adjusting the portfolio can help manage risk and capitalize on favorable market conditions, ensuring alignment with personal goals and risk tolerance.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's allocation is heavily skewed towards equities, with negligible exposure to cash or other asset classes. This focus on stocks supports growth but may increase vulnerability to market swings. Compared to common benchmarks, the lack of fixed-income or alternative investments suggests a higher risk profile. Introducing bonds or alternative assets could enhance diversification and provide a buffer against equity market volatility, aligning the portfolio more closely with a balanced investment strategy.

Sectors Info

  • Technology
    27%
  • Financials
    23%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Industrials
    8%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation reveals a concentration in technology (27%) and financial services (23%), which could lead to volatility, especially during sector-specific downturns. While these sectors have driven growth, diversification across a broader range of industries could reduce risk. Compared to benchmarks, this concentration is notable. Consider balancing the sector allocation by increasing exposure to underrepresented sectors like healthcare or utilities, which can provide stability and steady returns in different market cycles.

Regions Info

  • North America
    78%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographic exposure is heavily weighted towards North America (78%), with limited international diversification. This concentration may expose the portfolio to region-specific risks, such as regulatory changes or economic slowdowns. Compared to global benchmarks, there is an underrepresentation of emerging markets. Expanding geographic exposure to include more international markets, particularly emerging economies, can enhance diversification, reduce regional risk, and tap into growth opportunities outside North America.

Market capitalization Info

  • Mega-cap
    50%
  • Large-cap
    28%
  • Mid-cap
    16%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio is predominantly invested in mega-cap (50%) and big-cap (28%) stocks, with limited exposure to small and micro-cap companies. This focus on larger companies typically offers stability and steady growth but may miss out on the higher growth potential of smaller companies. Compared to benchmarks, the portfolio's market cap distribution suggests a conservative approach. Increasing exposure to small and mid-cap stocks could enhance growth potential and diversification, albeit with increased volatility.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The high correlation between the Vanguard Total Stock Market and Total World Stock Index ETFs indicates limited diversification benefits. When assets move together, the portfolio's risk management potential is reduced during market downturns. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation, such as a sector-specific or international-focused fund. This adjustment can help maintain growth potential while reducing overall portfolio risk.

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.

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The portfolio shows potential for optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. While the current portfolio is well-diversified, removing highly correlated assets can enhance efficiency. By adjusting the allocation among existing assets, the portfolio could achieve a higher expected return without increasing risk. This approach focuses on optimizing the current asset mix rather than introducing new investments, ensuring alignment with personal risk tolerance and investment goals.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.70%
  • Vanguard Total World Stock Index Fund ETF Shares 2.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.50%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.64%

With a total dividend yield of 1.64%, the portfolio provides a modest income stream. This yield is primarily driven by the Vanguard Total International Stock Index Fund ETF, which offers a 3.30% yield. Dividends can provide a steady source of income, especially in volatile markets. For investors seeking higher income, consider reallocating to higher-yielding stocks or funds. However, ensure that the pursuit of dividends does not compromise growth potential or increase risk beyond acceptable levels.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.05%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) of 0.05% is impressively low, supporting better long-term performance. Low costs are crucial for maximizing returns, as they compound over time. Compared to industry standards, this TER is highly competitive. Maintaining this cost-efficiency is beneficial for overall returns. Continue to monitor expense ratios, especially when considering new investments, to ensure that the portfolio remains cost-effective and aligned with long-term financial goals.

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