Balanced Dividend-Focused Portfolio with Strong U.S. Concentration and Moderate Risk

Report created on Nov 25, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is composed of a mix of ETFs and a single stock, primarily focusing on dividend yields. With a total of 88.85% in stocks and 11% in real estate, it leans towards equity investments, offering both growth and income potential. This setup reflects a balanced approach, with a slight tilt towards dividend-producing assets. While this can provide steady income, it's essential to ensure that the portfolio's overall risk aligns with long-term financial goals. The current composition indicates a focus on income generation, which can be beneficial in a stable market environment.

Growth Info

Historically, the portfolio has demonstrated a solid performance with a CAGR of 11.37%, indicating robust growth over time. However, it also experienced a significant max drawdown of -36.48%, highlighting its vulnerability during market downturns. The concentration of returns in just 24 days suggests that the portfolio's performance is driven by short periods of market gains. This can be a double-edged sword, as it may lead to volatility. Investors should be prepared for fluctuations and consider diversifying further to mitigate risks associated with such concentrated performance.

Projection Info

Using a Monte Carlo simulation, which models potential future outcomes through numerous scenarios, the portfolio shows promising projections. With a hypothetical initial investment, the median scenario predicts a 295.04% return, while the best-case scenario reaches 431.18%. The simulations indicate a high probability of positive returns, with 983 out of 1,000 scenarios showing gains. This suggests that the portfolio is well-positioned for future growth, although it's crucial to remain vigilant and adaptable to changing market conditions to maintain this trajectory.

Asset classes Info

  • Stocks
    89%
  • Real Estate
    11%

The portfolio is primarily composed of stock and real estate assets, with a negligible cash position. This allocation suggests a focus on capital appreciation and income generation through dividends. While stocks offer growth potential, real estate provides diversification and a steady income stream. However, the lack of bonds or other fixed-income assets may expose the portfolio to higher volatility. To balance risk and reward, consider introducing more asset classes, such as bonds, which can provide stability during market downturns and reduce overall portfolio risk.

Sectors Info

  • Real Estate
    23%
  • Technology
    14%
  • Financials
    12%
  • Health Care
    10%
  • Consumer Staples
    10%
  • Industrials
    8%
  • Energy
    7%
  • Consumer Discretionary
    6%
  • Telecommunications
    4%
  • Utilities
    3%
  • Basic Materials
    3%

The sector allocation is diverse, with significant exposure to real estate, technology, and financial services. Real estate holds the largest share, reflecting the portfolio's income focus. Technology and healthcare sectors provide growth opportunities, while consumer defensive and industrials offer stability. Despite this diversity, the concentration in real estate may increase risk during sector-specific downturns. To optimize sector allocation, consider balancing between cyclical and defensive sectors, ensuring the portfolio can weather various economic conditions and capitalize on growth across different industries.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is heavily skewed towards North America, with 99.2% of assets concentrated in this region. This focus on the U.S. market offers familiarity and stability but limits exposure to international growth opportunities. Diversifying geographically can reduce regional risks and benefit from global economic trends. Consider incorporating assets from emerging markets and developed regions outside North America to enhance diversification and tap into potential growth drivers worldwide, ultimately creating a more balanced and resilient portfolio.

Redundant positions Info

  • Vanguard S&P 500 ETF
    iShares Core High Dividend ETF
    Schwab U.S. Dividend Equity ETF
    Vanguard Dividend Appreciation Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard High Dividend Yield Index Fund ETF Shares
    ProShares S&P 500 Dividend Aristocrats ETF
    High correlation

The portfolio exhibits high correlation among several assets, particularly within the dividend-focused ETFs. This overlap can reduce the benefits of diversification, as these assets tend to move in tandem. While this can amplify gains during market upswings, it also increases risk during downturns. To enhance diversification, consider reducing exposure to highly correlated assets and introducing investments with lower correlation. This approach can help smooth out returns and provide a more balanced risk profile, ultimately leading to a more resilient portfolio.

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.

Before optimizing the portfolio, addressing the high correlation among assets is crucial. By removing overlapping investments, diversification benefits can be enhanced. Once this is achieved, the portfolio can be adjusted along the efficient frontier to align with desired risk levels. For a more conservative approach, consider increasing exposure to fixed-income assets. Conversely, for a riskier profile, focus on growth-oriented stocks. This strategic adjustment can help achieve a balanced risk-return ratio, ensuring the portfolio remains aligned with financial goals and market conditions.

Dividends Info

  • iShares Core High Dividend ETF 3.30%
  • ProShares S&P 500 Dividend Aristocrats ETF 2.00%
  • Realty Income Corp 5.40%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard Real Estate Index Fund ETF Shares 3.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 2.74%

The portfolio boasts a respectable total dividend yield of 2.74%, supported by a variety of dividend-focused ETFs and the Realty Income Corp stock. This yield provides a steady income stream, appealing to investors seeking regular cash flow. However, it's essential to monitor dividend sustainability, as market conditions and company performance can impact payouts. To maintain a reliable income stream, consider diversifying income sources and staying informed about changes in dividend policies. This proactive approach can help ensure a consistent and dependable yield over time.

Ongoing product costs Info

  • iShares Core High Dividend ETF 0.08%
  • ProShares S&P 500 Dividend Aristocrats ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.09%

With a total expense ratio (TER) of 0.09%, the portfolio is cost-efficient, minimizing the impact of fees on overall returns. This low-cost structure is advantageous, as it allows more of the portfolio's gains to be retained by the investor. However, it's crucial to remain vigilant about potential fee changes and explore opportunities to reduce costs further. By maintaining a focus on cost-effective investments, the portfolio can continue to maximize returns, enhancing the investor's ability to achieve their financial goals without unnecessary expense burdens.

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