A balanced ETF-focused portfolio with significant exposure to US equities and moderate international diversification

Report created on Dec 6, 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 primarily composed of three ETFs: SPDR® Portfolio S&P 500 ETF (50%), Vanguard Total International Stock Index Fund ETF Shares (30%), and Invesco NASDAQ 100 ETF (20%). This structure indicates a strong emphasis on equities, particularly in the US, with some international diversification. Such a composition can provide a solid foundation for growth, leveraging the stability and historical performance of large-cap US stocks while also capturing international market opportunities. However, the concentration in equities suggests a higher risk profile compared to a more diversified asset mix. To enhance diversity, consider incorporating other asset classes like bonds or real estate investment trusts (REITs).

Growth Info

Historically, the portfolio has demonstrated a strong compound annual growth rate (CAGR) of 13.83%, indicating robust performance over time. This impressive return underscores the potential of US equities, particularly in the technology sector, which has driven much of the market's growth. However, it's crucial to remember that past performance does not guarantee future results. The portfolio's maximum drawdown of -27.37% highlights the potential for significant losses during market downturns. To mitigate such risks, consider strategies like dollar-cost averaging or adjusting the asset allocation to include more defensive sectors or asset classes.

Projection Info

The forward projection of the portfolio uses Monte Carlo simulations, which run numerous scenarios based on historical data to predict future outcomes. With 1,000 simulations, the portfolio shows a median growth of 469.25%, with a 5th percentile outcome of 91.26% and a 67th percentile of 676.55%. While these projections can provide insights into potential returns, they rely on historical data and assumptions that may not hold in the future. It's essential to regularly review and adjust the portfolio to align with changing market conditions and personal risk tolerance.

Asset classes Info

  • Stocks
    99%

The portfolio's allocation is heavily skewed towards stocks, with 99.49% invested in equities and a negligible amount in cash and other assets. This concentration offers the potential for high returns, given the historical performance of equities, but also increases risk due to lack of diversification. A diversified portfolio typically includes a mix of asset classes like bonds, commodities, or real estate, which can reduce overall volatility and provide more stable returns. Consider diversifying across different asset classes to balance risk and return better.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Telecommunications
    9%
  • Health Care
    9%
  • Industrials
    9%
  • Consumer Staples
    6%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation within the portfolio is heavily weighted towards technology (30.77%), followed by financial services (12.91%) and consumer cyclicals (11.48%). This concentration in technology reflects the sector's strong growth prospects but also exposes the portfolio to sector-specific risks, such as regulatory changes or market saturation. A balanced sector allocation can mitigate these risks by spreading exposure across industries. Consider rebalancing the portfolio to achieve a more even distribution across sectors, potentially adding more defensive sectors like utilities or healthcare to reduce volatility.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic exposure is predominantly in North America (71.57%), with limited diversification into other regions like Europe Developed (12.10%) and Asia Emerging (5.02%). This concentration in North America may limit the potential to capitalize on growth opportunities in other markets, especially emerging economies that may offer higher returns. Geographic diversification can reduce risk by spreading investments across different economic environments. Consider increasing exposure to underrepresented regions to enhance diversification and capture global 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.

Optimization using the Efficient Frontier suggests that the portfolio can be adjusted to achieve a better risk-return ratio. This involves reallocating existing assets to find the optimal balance between risk and return, without necessarily adding new investments. By analyzing historical returns and volatility, the Efficient Frontier identifies the most efficient portfolio allocation. Consider periodic rebalancing to maintain this optimal allocation, ensuring that the portfolio remains aligned with your risk tolerance and investment goals. However, remember that optimization focuses on risk-return efficiency, not diversification or other objectives.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.59%

The portfolio has a total dividend yield of 1.59%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 2.9%. While dividends provide a steady income stream, the overall yield is relatively modest, reflecting the growth-oriented nature of the portfolio. For investors seeking higher income, increasing allocation to dividend-focused funds or stocks could enhance cash flow. However, it's important to balance the desire for income with the need for capital appreciation and risk management.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, indicating low costs associated with maintaining these ETFs. Lower costs can significantly enhance long-term returns by minimizing the drag on performance. The SPDR® Portfolio S&P 500 ETF, with an expense ratio of 0.02%, is particularly cost-effective. While the current costs are competitive, it's always beneficial to regularly review and compare expense ratios to ensure cost efficiency. Consider exploring other low-cost investment options or negotiating fees with financial advisors to further reduce expenses.

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