A conservative portfolio with a strong North American focus and moderate sector diversification

Report created on Jan 16, 2025

Risk profile Info

2/7
Conservative
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is comprised of four main positions, with a significant concentration in ETFs. The iShares Core Equity Portfolio and Vanguard S&P 500 Index ETF together make up a substantial portion, reflecting a focus on equity. The Horizons High Interest Savings ETF adds a cash component, enhancing stability. The small allocation to Canadian National Railway Co provides a touch of individual stock exposure. Compared to common conservative benchmarks, this portfolio leans heavily towards equities, which may introduce more volatility than typically expected for a conservative profile. Consider diversifying further into bonds or other fixed-income assets to align more closely with conservative benchmarks.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 8.87% with a maximum drawdown of -14.31%. This suggests a strong performance relative to conservative benchmarks, which often target lower returns with less volatility. The portfolio's ability to recover from downturns is notable, but the drawdown indicates potential risk during market declines. While past performance is not a guarantee of future results, maintaining this growth rate could be challenging in different market conditions. To mitigate potential risks, consider incorporating more defensive assets or strategies to reduce the impact of future drawdowns.

Projection Info

Monte Carlo simulations, which use historical data to forecast potential outcomes, show an annualized return of 7.4% for this portfolio. The median outcome suggests a substantial growth potential, but with a wide range of possible results. While 958 out of 1,000 simulations resulted in positive returns, it's important to remember that these projections are not foolproof and can be influenced by unpredictable market factors. Regularly reviewing and adjusting the portfolio based on changing market conditions and personal financial goals is advisable to stay aligned with desired outcomes.

Asset classes Info

  • US Equity
    46%
  • Cash
    30%
  • Stocks
    10%
  • Stocks
    2%

The portfolio's asset allocation is heavily skewed towards US equity (45.86%) and cash (29.55%), with minor allocations to other equities and stocks. This allocation provides some diversification but may limit growth potential due to the high cash component. In comparison to typical conservative portfolios, which often include more fixed-income assets, this portfolio could benefit from increased exposure to bonds or similar instruments to enhance stability and income. Adjusting the asset class balance could help achieve a more consistent risk-return profile, especially in volatile markets.

Sectors Info

  • Technology
    18%
  • Financials
    12%
  • Industrials
    9%
  • Consumer Discretionary
    7%
  • Health Care
    6%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is moderately diversified with notable exposure to technology (17.57%) and financial services (12.08%), while other sectors are less represented. This concentration in technology could lead to higher volatility, particularly in response to interest rate changes or market corrections. Aligning sector allocations more closely with broad market indices could help mitigate sector-specific risks. Consider gradually increasing exposure to underrepresented sectors like utilities or consumer defensives to achieve a more balanced approach that can withstand various economic cycles.

Regions Info

  • North America
    59%
  • Europe Developed
    6%
  • Japan
    2%
  • Asia Emerging
    1%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America (58.86%), with limited exposure to other regions. While this aligns well with a Canadian investor's home bias, it may reduce diversification benefits. Compared to global benchmarks, the portfolio is underexposed to Europe, Asia, and other emerging markets, which could offer growth opportunities. Expanding geographic diversification could help manage risk and capture returns from different economic environments. Consider adding international equities or funds to increase exposure to diverse markets.

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's Efficient Frontier analysis suggests potential for optimization, with an alternative allocation offering a higher expected return of 3.93% at the same risk level. This indicates room for improvement in the risk-return ratio. While efficiency focuses on maximizing returns for a given risk, it may not account for diversification or individual goals. Consider rebalancing the portfolio to approach the Efficient Frontier, potentially increasing returns without increasing risk. Regular re-evaluation can ensure the portfolio remains aligned with evolving market conditions and personal objectives.

Dividends Info

  • Horizons High Interest Savings ETF 2.40%
  • Canadian National Railway Co 1.20%
  • Vanguard S&P 500 Index ETF 0.50%
  • iShares Core Equity Portfolio 0.90%
  • Weighted yield (per year) 1.24%

The portfolio's dividend yield is relatively low at 1.24%, with contributions from the Horizons High Interest Savings ETF and Canadian National Railway Co. While dividends can provide a steady income stream, this yield may not significantly impact overall returns. For a conservative investor seeking income, increasing exposure to higher-yielding assets could be beneficial. Consider evaluating dividend-focused funds or stocks to enhance income potential without substantially increasing risk. Balancing growth and income is key to achieving a well-rounded conservative investment strategy.

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