A balanced portfolio with strong North American focus and moderate dividend yield potential
Report created on Dec 9, 2024Risk profile
4/7
Diversification profile
3/5
Positions
-
VF Vanguard S&P 500 Index ETF
VFV - CA92205Y1051 50.00% -
VG Vanguard Growth Portfolio
VGRO - CA92207X1050 30.00% -
VD Vanguard FTSE Canadian High Dividend Yield
VDY - CA92203Q1046 20.00%
The portfolio is heavily weighted towards equity, with 50% in the Vanguard S&P 500 Index ETF, 30% in the Vanguard Growth Portfolio, and 20% in the Vanguard FTSE Canadian High Dividend Yield ETF. This composition suggests a focus on growth through equity investments, with a significant portion allocated to the US market. Such a structure can offer growth potential but also exposes the portfolio to market volatility. To maintain balance, consider revisiting allocations periodically to ensure alignment with market conditions and personal risk tolerance.
Growth
With a historical compound annual growth rate (CAGR) of 13.4%, the portfolio has demonstrated strong past performance. However, the maximum drawdown of -29.04% indicates vulnerability during market downturns. This performance highlights the potential for significant gains, but also the risk of substantial losses. Investors should consider their comfort with volatility and ensure they have a strategy for managing downturns, such as maintaining a long-term perspective and avoiding panic selling.
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With a 50th percentile end value of 426.16%, the portfolio could perform well under average conditions. However, it's important to remember that such simulations are based on past data and cannot predict future performance with certainty. Investors should use these projections as a guide rather than a guarantee, and remain adaptable to changing market conditions.
Asset classes
- US Equity 61%
- Stocks 27%
- Bonds 6%
The portfolio's asset allocation is predominantly in equity, with US Equity making up 60.77% and additional equity exposure at 27.04%. This heavy equity focus can drive growth but also increases exposure to market volatility. The minimal bond and cash holdings may limit downside protection. For a more balanced risk profile, consider increasing allocations to bonds or other fixed-income assets, which can provide stability and income during market fluctuations.
Sectors
- Financials 24%
- Technology 23%
- Energy 10%
- Health Care 8%
- Consumer Discretionary 8%
- Telecommunications 7%
- Industrials 7%
- Consumer Staples 4%
- Utilities 3%
- Basic Materials 3%
- Real Estate 2%
Sector allocation shows a concentration in Financial Services (24.05%) and Technology (22.53%), with smaller allocations across other sectors. This concentration can enhance returns if these sectors perform well, but also increases risk if they underperform. To mitigate sector-specific risks, consider diversifying further into underrepresented sectors like Utilities or Real Estate, which can offer stability and income, especially during economic downturns.
Regions
- North America 92%
- Europe Developed 3%
- Asia Emerging 1%
- Japan 1%
- Asia Developed 1%
The portfolio is heavily concentrated in North America, with 92.46% of assets, limiting exposure to international markets. While this focus can capitalize on the strength of North American economies, it may also miss opportunities in emerging and developed markets elsewhere. To enhance geographic diversification, consider increasing allocations to regions like Europe or Asia, which can provide exposure to different economic cycles and growth opportunities.
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 Efficient Frontier concept suggests that the portfolio can be optimized to achieve the best possible risk-return ratio. This involves adjusting the current asset allocations to maximize returns for a given level of risk. While this optimization focuses solely on the existing assets, it can help align the portfolio more closely with the investor's risk tolerance and financial goals. Regularly reviewing and adjusting allocations can ensure the portfolio remains efficient over time.
Dividends
- Vanguard FTSE Canadian High Dividend Yield 2.50%
- Vanguard S&P 500 Index ETF 0.70%
- Vanguard Growth Portfolio 1.80%
- Weighted yield (per year) 1.39%
The portfolio's overall dividend yield is 1.39%, with the Vanguard FTSE Canadian High Dividend Yield ETF contributing the most at 2.5%. While dividends can provide a steady income stream, the yield is relatively modest. Investors seeking higher income may want to explore additional dividend-focused investments or consider reinvesting dividends to enhance long-term growth. Balancing growth and income is key to meeting financial goals.
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