A cautious and diversified portfolio with a focus on dividend and total market ETFs

Report created on Apr 1, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of a balanced mix of asset types, with a notable emphasis on ETFs. It includes 79% in stocks, 20% in bonds, and 1% in cash. This composition provides a solid foundation for diversification, aligning closely with typical benchmark compositions. The inclusion of both U.S. and international stocks, alongside bonds, ensures a broad market exposure. This structure is beneficial for risk management, as it spreads investments across different asset classes. To further enhance diversification, consider adding more exposure to other asset types like real estate or commodities, which could offer additional stability during market fluctuations.

Growth Info

Historically, the portfolio has shown a Compound Annual Growth Rate (CAGR) of 8.48%, which is respectable for a cautious investment strategy. The maximum drawdown of -27.42% highlights the potential risk during market downturns. Despite this, the portfolio has managed to recover, with 90% of returns concentrated over just 25 days. This indicates the importance of staying invested during volatile periods. Comparing this performance to a benchmark, the portfolio has performed well, particularly considering its risk classification. Investors should remain aware that past performance does not guarantee future results and should continue to monitor market conditions.

Projection Info

The forward projection, using Monte Carlo simulations, suggests a promising outlook with an annualized return of 9.43%. With 1,000 simulations, 97.2% resulted in positive returns, showcasing the portfolio's resilience. The 5th percentile projection at 16.7% and the median at 207.1% indicate a wide range of potential outcomes. This method uses historical data to simulate future performance, but it's important to remember that it cannot predict exact results. Investors should use these projections as a guide rather than a definitive forecast, and consider re-evaluating their strategy if market conditions change significantly.

Asset classes Info

  • Stocks
    79%
  • Bonds
    20%
  • Cash
    1%

The portfolio's allocation across asset classes is predominantly in stocks, at 79%, with bonds making up 20%. This allocation is typical for a moderately cautious investor, providing growth potential while maintaining a buffer against volatility through bonds. Compared to common benchmarks, this mix is well-balanced, offering both income and appreciation opportunities. However, the minimal cash allocation might limit liquidity. To enhance diversification, consider incorporating alternative asset classes like real estate or commodities, which could provide additional protection during market downturns.

Sectors Info

  • Health Care
    17%
  • Consumer Staples
    15%
  • Technology
    12%
  • Financials
    11%
  • Industrials
    7%
  • Consumer Discretionary
    6%
  • Telecommunications
    4%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is diverse, with a focus on healthcare (17%) and consumer defensive (15%) sectors. This concentration offers stability, as these sectors are generally less volatile. However, a 12% allocation in technology could introduce some volatility, especially during periods of interest rate changes. Compared to benchmarks, this sector mix is well-aligned, providing a balanced approach to risk and growth. To further mitigate risk, consider diversifying into sectors like utilities or real estate, which may offer more consistent returns during economic fluctuations.

Regions Info

  • North America
    64%
  • Europe Developed
    7%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America at 64%, with limited exposure to emerging markets. This concentration aligns with common benchmarks but may limit diversification benefits. The modest allocations to Europe Developed and Asia Emerging provide some international exposure, which can help mitigate regional risks. To enhance diversification, consider increasing exposure to underrepresented regions like Latin America or Africa/Middle East. This could reduce reliance on North American markets and potentially improve overall portfolio resilience.

Market capitalization Info

  • Large-cap
    33%
  • Mega-cap
    25%
  • Mid-cap
    18%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio's market capitalization distribution is skewed towards large-cap stocks, with 33% in big caps and 25% in mega caps. This focus provides stability and lower volatility, as larger companies tend to be more established. However, the limited exposure to small (3%) and micro caps (1%) may restrict growth potential. Compared to benchmarks, this allocation is typical for a cautious investor. To capture potential high-growth opportunities, consider increasing allocations to small and mid-cap stocks, which can offer higher returns albeit with increased risk.

Redundant positions Info

  • Schwab U.S. Dividend Equity ETF
    Vanguard High Dividend Yield Index Fund ETF Shares
    High correlation
  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

Asset correlation within the portfolio shows significant overlap, particularly between the Schwab U.S. Dividend Equity ETF and Vanguard High Dividend Yield Index Fund ETF Shares. This high correlation may limit diversification benefits during market downturns, as these assets tend to move together. While this overlap can provide consistent income, it may not offer sufficient protection against volatility. Consider diversifying into less correlated assets to enhance risk management and improve overall portfolio resilience. This could involve exploring alternative asset classes or sectors with differing economic sensitivities.

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 can be optimized using the Efficient Frontier, which involves adjusting asset weights to achieve the best possible risk-return ratio. This method focuses on maximizing returns for a given level of risk, based solely on current assets. While the portfolio is already well-diversified, slight adjustments in asset allocation could enhance efficiency. Consider reducing exposure to highly correlated assets and reallocating towards underrepresented asset classes or regions. This approach ensures a more balanced risk-return profile, aligning with the investor's cautious risk tolerance and long-term goals.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard Total World Stock Index Fund ETF Shares 1.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.40%
  • Vanguard Total International Stock Index Fund ETF Shares 2.80%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.90%
  • Consumer Staples Select Sector SPDR® Fund 1.30%
  • Health Care Select Sector SPDR® Fund 1.20%
  • Weighted yield (per year) 2.41%

The portfolio boasts a healthy dividend yield of 2.41%, with contributions from various ETFs focused on dividends. This yield provides a steady income stream, which is particularly appealing for risk-averse investors seeking regular returns. Compared to benchmarks, this yield is competitive, enhancing the portfolio's appeal for income-focused investors. However, relying heavily on dividend stocks may limit growth potential. To balance income and growth, consider integrating growth-focused assets that offer capital appreciation potential, while maintaining a core of dividend-paying stocks for stability.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.05%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Consumer Staples Select Sector SPDR® Fund 0.09%
  • Health Care Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, which is beneficial for long-term performance. Lower costs mean more of the investment returns stay with the investor, compounding over time. This cost efficiency aligns well with best practices and is a strong indicator of a well-managed portfolio. Compared to industry averages, these costs are commendably low, supporting better net returns. While costs are already optimized, continue monitoring fees and consider rebalancing if any new, lower-cost options become available, ensuring the portfolio remains cost-effective.

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