Tutorial: Evaluating a 3-Fund Portfolio

This tutorial walks through using etfray's Portfolio Analytics to analyze a classic three-fund portfolio and uncover hidden concentration, sector tilts, and geographic exposure.

The Scenario

You hold a common three-fund portfolio:

• VTI (US Total Stock Market) — 60% of portfolio
• VXUS (International Stock Market) — 30% of portfolio
• BND (US Aggregate Bond) — 10% of portfolio

This is widely considered a well-diversified allocation. But what does it actually look like at the stock level?

Prerequisites

• IBKR TWS/Gateway running with these positions (or similar)
• etfray connected (see IBKR Setup)

Steps

1. Check your positions

Navigate to Portfolio → Positions. Confirm your holdings and their portfolio weights. The weights should roughly match your target allocation.

2. View lookthrough exposure

Switch to Portfolio → Lookthrough. etfray decomposes each ETF into its underlying holdings and weights them by your position size.

What you'll see:

Your top underlying holdings will be something like:

Stock	Effective Weight	Source ETFs
Apple	~3.9%	VTI
Microsoft	~3.6%	VTI
Nvidia	~3.0%	VTI
Amazon	~2.1%	VTI
Taiwan Semiconductor	~1.2%	VXUS

Notice that your top single-stock exposures all come from VTI. Even in a "diversified" portfolio, the US mega-caps dominate because VTI is cap-weighted and makes up 60% of your portfolio.

Note

BND (bonds) will likely appear in the "unresolved" list since its holdings are individual bonds, not stocks. This is expected — bond ETF lookthrough is less meaningful at the individual security level.

3. Check sector exposure

Switch to Portfolio → Exposure. This aggregates sector exposure across all your equity ETFs.

Typical result for this portfolio:

Sector	Weight
Technology	~22%
Financials	~14%
Healthcare	~12%
Consumer Discretionary	~10%
Industrials	~10%

The sector weights are dominated by VTI (60% of portfolio) with VXUS (30%) adding some international sector diversification. Technology is your largest sector bet — driven by US mega-cap tech.

4. Check geographic exposure

Still in the Exposure view, look at geographic breakdown:

Region	Weight
United States	~60%
Japan	~5%
United Kingdom	~3%
China	~3%
Other international	~19%
Bonds (unresolved)	~10%

Your equity allocation is roughly 67% US / 33% international (excluding bonds), which matches the VTI/VXUS ratio.

5. Analyze concentration

Switch to Portfolio → Concentration. This shows your effective diversification at the stock level.

Key metrics to look for:

• Top 10 weight: ~25% — your top 10 stocks make up a quarter of your equity exposure
• Effective N: ~80–100 — despite holding thousands of underlying stocks, your portfolio behaves like ~80–100 equal-weight positions
• Verdict: "Broadly diversified" — but less so than you might expect from holding 7,000+ underlying stocks

6. Insights and actions

What this analysis reveals:

1. Hidden concentration in US mega-caps — Apple alone is ~4% of your portfolio. The top 5 US tech stocks are ~15% combined.
2. Sector tilt toward technology — Not a problem if intentional, but worth knowing.
3. Geographic diversification is working — VXUS provides genuine international exposure with minimal overlap to VTI.
4. Bonds are opaque — BND's individual bond holdings don't decompose well, but that's fine — the 10% allocation provides its diversification benefit at the asset-class level.

Possible adjustments (not recommendations, just observations):

• If 4% in Apple concerns you, consider equal-weight alternatives (like RSP instead of VOO)
• If you want less tech concentration, VXUS naturally has lower tech weight than VTI
• The 60/30/10 split is already well-diversified — the "hidden concentration" is inherent to cap-weighting, not a portfolio construction flaw

Next Steps

• Run the Overlap Analysis between VTI and VXUS to confirm they're complementary (~0% overlap expected)
• Check the Margin Monitoring tutorial if you use leverage
• Export your holdings data from the Research workspace for further analysis in a spreadsheet