A balanced portfolio with high equity exposure and limited geographic diversification
Report created on Dec 7, 2024Risk profile
4/7
Diversification profile
2/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 41.73% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 34.59% -
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 23.68%
This portfolio is heavily weighted towards equity ETFs, with significant allocations to the Vanguard S&P 500 ETF, Schwab U.S. Dividend Equity ETF, and Invesco NASDAQ 100 ETF. The portfolio's composition is skewed towards large-cap U.S. equities, which can offer growth potential but may also introduce concentration risk. Understanding the types of assets and their weightings is crucial, as it helps in identifying potential risks and returns. To enhance diversification, consider adding other asset classes like bonds or international equities, which can provide stability and reduce volatility.
Growth
Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 15.61%. A hypothetical initial investment would have grown significantly, but it also experienced a maximum drawdown of -23.42%, indicating vulnerability during market downturns. Historical performance is a useful indicator of how the portfolio might behave, but it's not a guarantee of future results. To mitigate potential downsides, consider strategies like rebalancing or including defensive assets that can cushion against market volatility.
Projection
Using Monte Carlo simulations, this portfolio projects a wide range of potential outcomes, with a median growth of 715.37% over the investment horizon. Monte Carlo analysis uses historical data to model future returns, helping investors understand the range of possible outcomes. However, it does not account for unforeseen market changes or shifts in economic conditions. To prepare for various scenarios, regularly review and adjust the portfolio to align with your evolving financial goals and risk tolerance.
Asset classes
- Stocks 100%
The portfolio is predominantly composed of stocks, with a negligible cash position. While stocks can provide substantial growth, the lack of diversification across asset classes can increase risk. Diversification helps in spreading risk and potentially improving returns by including different types of investments. Consider incorporating other asset classes like fixed income, real estate, or commodities to achieve a more balanced risk-return profile.
Sectors
- Technology 30%
- Financials 12%
- Consumer Discretionary 11%
- Health Care 11%
- Telecommunications 9%
- Consumer Staples 8%
- Industrials 8%
- Energy 6%
- Basic Materials 2%
- Utilities 1%
- Real Estate 1%
The portfolio's sector allocation is concentrated, with a significant portion in technology and financial services. This concentration can lead to volatility if these sectors underperform. Sector diversification is important as it spreads exposure across different economic areas, reducing the impact of sector-specific downturns. To achieve a more balanced sector allocation, consider investing in sectors currently underrepresented in the portfolio.
Regions
- North America 99%
- Europe Developed 1%
The portfolio's geographic exposure is heavily concentrated in North America, with minimal allocations to other regions. Geographic diversification can mitigate risks associated with regional economic downturns and currency fluctuations. By investing in emerging and developed markets outside North America, you can potentially tap into growth opportunities and reduce the portfolio's regional risk concentration.
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 could potentially improve the portfolio's risk-return ratio by adjusting the allocation among existing assets. The Efficient Frontier represents the optimal mix of assets that offers the highest expected return for a given level of risk. While the portfolio is currently balanced, exploring different allocations could reveal opportunities to enhance returns without substantially increasing risk.
Dividends
- Invesco NASDAQ 100 ETF 0.60%
- Schwab U.S. Dividend Equity ETF 2.50%
- Vanguard S&P 500 ETF 1.20%
- Weighted yield (per year) 1.51%
The portfolio has a moderate dividend yield of 1.51%, primarily driven by the Schwab U.S. Dividend Equity ETF. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. To increase income potential, consider reinvesting dividends or exploring higher-yielding investments, keeping in mind the associated risks and the need for balance within the portfolio.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Schwab U.S. Dividend Equity ETF 0.06%
- Vanguard S&P 500 ETF 0.03%
- Weighted costs total (per year) 0.07%
The portfolio's total expense ratio is low at 0.07%, which is beneficial for long-term returns as it minimizes the drag on performance. Lower costs mean more of your investment returns stay in your pocket, compounding over time. While the current costs are favorable, regularly reviewing fund fees and exploring cost-effective alternatives can further enhance net returns, especially if changes in the portfolio are contemplated.
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