A balanced US-focused portfolio with strong growth potential and moderate risk diversification

Report created on Dec 14, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is predominantly composed of ETFs, with a significant 40% allocation to the Vanguard S&P 500 ETF. Other notable components include Schwab U.S. Dividend Equity ETF and various Vanguard funds focusing on small-cap, mid-cap, value, growth, and international stocks. The asset allocation is heavily weighted towards equities, making it a stock-centric portfolio. This composition suggests a focus on capital appreciation through equity markets, with a minor allocation to cash and other assets. To enhance diversification, consider incorporating more asset classes such as fixed income or alternative investments, which can provide stability during market downturns.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a compound annual growth rate (CAGR) of 13.11%. However, it has also experienced significant volatility, with a maximum drawdown of nearly 35%. This highlights the potential for high returns but also significant risk. It's important to understand that past performance is not indicative of future results, as market conditions can change. To mitigate risk, consider strategies such as rebalancing or increasing exposure to less volatile assets, which can help cushion the impact of market fluctuations.

Projection Info

Forward projections using Monte Carlo simulations provide a range of possible future outcomes based on historical data. With 1,000 simulations, the portfolio shows a 50th percentile return of 385.53% and a 67th percentile return of 565.75%. While these projections suggest substantial growth potential, it's crucial to remember that they are based on historical patterns and do not guarantee future performance. To better prepare for uncertainty, consider stress-testing the portfolio against various market scenarios and adjusting allocations to align with your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly allocated to stocks, with nearly 100% in equities. This heavy concentration in a single asset class can limit diversification benefits and expose the portfolio to market risk. While equities offer growth potential, they are also susceptible to volatility. To enhance diversification, consider adding other asset classes such as bonds, which can provide a buffer against stock market fluctuations and reduce overall portfolio risk. Diversifying across asset classes can help achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    25%
  • Financials
    15%
  • Health Care
    11%
  • Industrials
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Real Estate
    3%
  • Utilities
    3%
  • Basic Materials
    3%

Sector allocation is diversified, with a notable emphasis on technology (25%), financial services (15%), and healthcare (11%). While this provides exposure to various economic segments, the concentration in technology could result in sector-specific risk. It's important to ensure that sector allocations align with your investment goals and risk tolerance. To mitigate sector risk, consider rebalancing the portfolio to achieve a more even distribution across sectors. This can help protect against downturns in any single sector and enhance overall stability.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

The portfolio has a strong geographic focus on North America, comprising over 90% of the allocation. While this provides exposure to a stable and mature market, it limits diversification benefits that come from international exposure. Expanding geographic diversification can help mitigate region-specific risks and capitalize on growth opportunities in emerging and developed markets outside North America. Consider increasing allocations to regions such as Europe, Asia, and Latin America to achieve a more globally diversified portfolio.

Redundant positions Info

  • Vanguard Value Index Fund ETF Shares
    Schwab U.S. Dividend Equity ETF
    High correlation
  • Vanguard Mid-Cap Index Fund ETF Shares
    Vanguard Small-Cap Index Fund ETF Shares
    Vanguard S&P 500 ETF
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among the Vanguard Value Index Fund, Schwab U.S. Dividend Equity ETF, and various other Vanguard funds. High correlation means these assets tend to move in the same direction, reducing diversification benefits. To optimize risk management, consider reducing exposure to overlapping assets and introducing investments with lower correlation. This can help achieve a more balanced portfolio, minimizing the impact of market volatility and enhancing potential returns through diversification.

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 can help achieve the best possible risk-return ratio based solely on current assets. By adjusting allocations among existing holdings, the portfolio can be rebalanced to enhance efficiency. This process involves evaluating the risk and return characteristics of each asset and finding the optimal balance. It's important to note that optimization focuses on maximizing returns for a given level of risk, not necessarily achieving broader diversification. Regularly reassessing the portfolio's efficiency can ensure alignment with evolving market conditions and investment goals.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 2.60%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Value Index Fund ETF Shares 2.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.63%

The portfolio's dividend yield stands at 1.63%, with notable contributions from the Schwab U.S. Dividend Equity ETF and Vanguard Total International Stock Index Fund. Dividends provide a steady income stream, complementing capital gains. While the yield is moderate, reinvesting dividends can enhance long-term growth through compounding. To increase income generation, consider allocating more to dividend-focused funds or individual stocks with a history of reliable payouts. Balancing growth and income can help achieve a more comprehensive investment strategy.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio is cost-efficient, with an average expense ratio of 0.04%. Lower costs can significantly enhance long-term returns, as fees compound over time. This is an advantage for investors seeking to maximize net returns. However, it's essential to periodically review and compare costs with alternative investments to ensure continued efficiency. Consider exploring opportunities to further reduce expenses, such as switching to lower-cost funds or negotiating fees, which can improve overall portfolio performance.

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