A balanced portfolio with a focus on U.S. equities and moderate emerging market exposure

Report created on Dec 19, 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 composed of five exchange-traded funds (ETFs) with a significant focus on U.S. equities. The largest allocations are to the Schwab U.S. Broad Market ETF and Schwab U.S. Large-Cap Growth ETF, each making up 25% of the portfolio. The Schwab U.S. Dividend Equity ETF holds 20%, while the Schwab Emerging Markets and International Equity ETFs each account for 15%. This structure suggests a balanced approach, with a strong emphasis on U.S. markets and moderate international diversification. A diversified mix of growth, dividend, and emerging market assets is present, aiming to balance risk and reward.

Growth Info

Historically, the portfolio has demonstrated a compound annual growth rate (CAGR) of 12.15%, reflecting robust performance. However, it also experienced a maximum drawdown of -33.14%, indicating susceptibility to significant market downturns. This performance suggests that while the portfolio has delivered strong returns in the past, it has also faced periods of volatility. Investors should be aware that past performance does not guarantee future results, and market conditions can change. It's essential to maintain a long-term perspective and be prepared for potential fluctuations in value.

Projection Info

The Monte Carlo simulation, which uses historical data to predict potential future outcomes, shows a wide range of possibilities for this portfolio. With 1,000 simulations, the median projected return is 310.63%, while the 5th percentile is 31.97%, and the 67th percentile is 438.58%. This suggests that while the portfolio has a high likelihood of positive returns, there is also a significant range of potential outcomes. Investors should understand that simulations are based on historical data and assumptions, which may not fully predict future market conditions.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.4% of the allocation in equities, leaving minimal exposure to cash, bonds, or other asset classes. This high equity concentration suggests a focus on growth but also increases exposure to market volatility. While equities can provide strong returns, they also carry higher risk, particularly in turbulent markets. To enhance diversification and potentially reduce risk, consider incorporating other asset classes like bonds or real estate, which may offer more stability and income.

Sectors Info

  • Technology
    27%
  • Financials
    16%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is varied, with a significant concentration in technology at 26.59%, followed by financial services at 16.08%. Other sectors such as consumer cyclicals and healthcare also have notable allocations. This diversified sector exposure can help mitigate sector-specific risks, but the heavy weighting in technology may increase vulnerability to sector downturns. To achieve a more balanced sector allocation, consider adjusting weightings to reduce concentration in any single sector, thereby enhancing resilience against sector-specific volatility.

Regions Info

  • North America
    71%
  • Asia Emerging
    9%
  • Europe Developed
    8%
  • Asia Developed
    4%
  • Japan
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

The portfolio's geographic exposure is predominantly in North America, which accounts for 71.23% of the allocation. There is moderate exposure to emerging markets in Asia and developed markets in Europe and Asia. This geographic concentration in North America can lead to higher risk if the U.S. market underperforms. To improve geographic diversification, consider increasing exposure to regions with different economic cycles, such as Europe or emerging markets, which could provide opportunities for growth and risk mitigation.

Redundant positions Info

  • Schwab U.S. Broad Market ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets, particularly between the Schwab U.S. Broad Market ETF and the Schwab U.S. Large-Cap Growth ETF. High correlation among assets can reduce diversification benefits, as correlated assets tend to move together in the market. To manage risk more effectively, consider reducing overlapping positions or adding assets with lower correlation to the existing holdings. This approach can help enhance diversification and potentially improve the portfolio's risk-adjusted returns.

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 could benefit from optimization using the Efficient Frontier, focusing on the best possible risk-return ratio. This involves adjusting the allocation of existing assets to achieve a more efficient portfolio, without necessarily adding new assets. By reducing the allocation to highly correlated assets and considering the risk and return characteristics of each holding, the portfolio can aim to maximize returns for a given level of risk. This process helps in achieving a more balanced and potentially more rewarding investment strategy.

Dividends Info

  • Schwab U.S. Broad Market ETF 0.90%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab Emerging Markets Equity ETF 3.00%
  • Schwab International Equity ETF 1.00%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 1.66%

The portfolio has a total dividend yield of 1.66%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.7%. Dividends can provide a steady income stream and contribute to the overall return, especially in volatile markets. While the yield is moderate, focusing on dividend-paying assets can help cushion against market downturns. Consider reinvesting dividends to compound growth over time or using them as a source of income, depending on your financial goals and needs.

Ongoing product costs Info

  • Schwab U.S. Broad Market ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab Emerging Markets Equity ETF 0.11%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is low at 0.06%, with individual ETF costs ranging from 0.03% to 0.11%. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode gains over time. The current cost structure is favorable, allowing more of the portfolio's returns to be retained. Regularly review and compare expense ratios to ensure they remain competitive. Consider reallocating to lower-cost alternatives if available, while maintaining the desired asset allocation and investment strategy.

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