Balanced Portfolio with Low Diversity and High U.S. Exposure Suggests Potential for Moderate Growth and Stability

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio is suitable for a moderately risk-tolerant investor seeking balanced growth and income. With a focus on U.S. equities and a moderate dividend yield, it appeals to those interested in capital appreciation and some income generation. The investor likely has a medium to long-term investment horizon and is comfortable with some market volatility. A balanced approach caters to individuals looking to participate in market gains while managing risks, making it ideal for those with a steady financial outlook and a willingness to adapt to changing market conditions.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    65.76%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    20.11%
  • Realty Income Corp
    O - US7561091049
    14.13%

The portfolio is heavily invested in U.S.-based ETFs and a single stock, with a significant allocation to the Vanguard S&P 500 ETF. This suggests a strong focus on large-cap U.S. equities. While this provides exposure to a broad market index, the concentration in a few instruments limits diversification. A balanced profile aims to balance risk and return, but low diversity may not fully capitalize on this. Consider diversifying across more asset classes and sectors to mitigate potential market-specific risks and enhance stability.

Growth Info

Historically, the portfolio has performed well with a CAGR of 13.13%, indicating strong growth potential. However, the max drawdown of -35.57% highlights vulnerability to market downturns. This performance suggests that while the portfolio has benefited from bull markets, it may face significant declines during bearish periods. To maintain growth while managing risk, consider strategies to protect against large drawdowns, such as incorporating more defensive assets or considering tactical asset allocation shifts during volatile periods.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The median projection suggests a growth of 297.73%, with most simulations resulting in positive returns. This indicates a favorable risk-return profile. However, the variability in outcomes underscores the uncertainty inherent in investing. To better prepare for different market scenarios, consider stress-testing the portfolio under various economic conditions and adjusting allocations to manage potential risks while aligning with long-term goals.

Asset classes

  • Stocks
    100%
  • Cash
    0%

The portfolio is overwhelmingly concentrated in stocks, with a minor cash component. This high equity exposure can drive significant returns but also increases susceptibility to market volatility. A more balanced allocation across asset classes, such as bonds or alternative investments, could help reduce risk and provide more consistent returns. By diversifying asset classes, the portfolio can achieve a more stable performance, especially during periods of stock market turbulence. Consider evaluating the risk tolerance and financial goals to determine the appropriate asset mix.

Sectors

  • Technology
    24%
  • Real Estate
    16%
  • Financials
    13%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio spans various sectors, with a notable tilt towards technology and real estate. While this sector allocation can capture growth from these industries, it may also expose the portfolio to sector-specific risks. A well-diversified sector allocation can help mitigate these risks by spreading exposure across different economic areas. Consider periodically reviewing sector allocations to ensure they align with market trends and personal risk tolerance. Balancing sector weights could enhance resilience against sector downturns and capture opportunities in emerging industries.

Regions

  • North America
    99%
  • Europe Developed
    0%
  • Asia Developed
    0%
  • Latin America
    0%

With nearly all assets based in North America, the portfolio is heavily concentrated in the U.S. market. This focus can benefit from the stability and growth of the U.S. economy but may also miss out on opportunities in other regions. Geographic diversification can reduce country-specific risks and tap into growth in emerging markets. Consider exploring international investments to broaden exposure and enhance the portfolio's resilience against regional economic fluctuations. A more global approach could provide a hedge against U.S. market volatility.

Dividends

  • Realty Income Corp 5.00%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 2.16%

The portfolio's dividend yield of 2.16% provides a moderate income stream, primarily driven by the Schwab U.S. Dividend Equity ETF and Realty Income Corp. While dividends can enhance total returns and provide cash flow, the focus on dividends should not overshadow growth potential. Evaluate the balance between income and growth to ensure alignment with financial goals. Consider reinvesting dividends to compound returns over time or adjusting allocations to optimize the income-growth balance based on personal preferences.

Ongoing product costs

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from low costs, with the Vanguard S&P 500 ETF's expense ratio at 0.03% and Schwab U.S. Dividend Equity ETF at 0.06%. Keeping investment costs low is crucial for maximizing net returns. Although costs are already minimized, regularly reviewing and comparing expense ratios across similar funds can further enhance cost efficiency. Ensuring that investment choices provide value for costs incurred is key to maintaining long-term portfolio performance. Consider periodically assessing cost structures to ensure they remain competitive.

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.

The portfolio optimization chart suggests potential improvements by adjusting along the efficient frontier. For a riskier portfolio, increasing exposure to growth-oriented assets could enhance returns. Conversely, shifting towards more conservative investments like bonds could reduce risk. Before optimizing, focus on enhancing diversification and managing sector and geographic exposures. Once these areas are addressed, fine-tuning the portfolio along the efficient frontier can help balance risk and return. Achieving the desired risk level involves aligning investments with personal goals and market conditions.

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