A balanced portfolio with strong US focus and limited diversification across asset classes

Report created on Dec 30, 2024

Risk profile Info

4/7
Balanced
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Diversification profile Info

2/5
Low Diversity
← Less diversification More diversification →

Positions

This portfolio is composed primarily of US equity funds and ETFs, with a significant focus on large-cap stocks. The Fidelity 500 Index Fund holds the largest position at 30%, followed by the Schwab U.S. Dividend Equity ETF and Schwab U.S. Large-Cap Growth ETF at 25% each. The Vanguard Total Stock Market Index Fund ETF Shares rounds out the portfolio at 20%. This allocation leans heavily towards equities, which is common for a balanced profile but lacks diversification across asset classes. To enhance diversification, consider incorporating bonds or alternative assets to mitigate risk.

Growth Info

Historically, the portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 14.35%, suggesting robust growth. However, it also experienced a maximum drawdown of -33.39%, indicating vulnerability during market downturns. This performance aligns well with typical equity-heavy portfolios, which can offer high returns but also higher volatility. For investors seeking steadier returns, introducing more defensive assets could help reduce potential drawdowns while still capturing growth opportunities.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a positive outlook for this portfolio. With a 50th percentile projection of 508.14% and an annualized return of 15.47%, the potential for significant growth is evident. However, it's important to remember that simulations are based on past data and cannot guarantee future results. To prepare for various scenarios, regularly reviewing and adjusting your portfolio in response to market changes is advisable.

Asset classes Info

  • Stocks
    100%

This portfolio is heavily weighted in stocks, accounting for 99.67% of the total allocation, with only a minimal cash position. Such concentration in a single asset class can limit diversification benefits and expose the portfolio to equity market volatility. Diversifying into other asset classes, such as bonds or real estate, could provide a buffer against market fluctuations and improve the overall risk-return profile. This step would align more closely with a balanced investment strategy.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Health Care
    12%
  • Telecommunications
    9%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Consumer Discretionary
    3%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is concentrated, with technology making up over 30%. While this has been a strong-performing sector, it can also be volatile, especially during interest rate hikes. Other sectors like financial services and healthcare provide some balance, but further diversification could be beneficial. Introducing exposure to underrepresented sectors such as utilities or real estate might help mitigate risk and capitalize on sector-specific growth trends, enhancing overall stability.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly focused on North America, with 99.51% allocation. This concentration limits exposure to international markets, which can offer diversification benefits and growth opportunities. Expanding geographic exposure to include more developed and emerging markets could help reduce regional risk and capture global economic growth. A more balanced geographic allocation can also protect against potential downturns in the US market.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Fidelity 500 Index Fund
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among the Schwab U.S. Large-Cap Growth ETF, Fidelity 500 Index Fund, and Vanguard Total Stock Market Index Fund ETF Shares. High correlation means these assets tend to move in tandem, reducing diversification benefits. To improve diversification, consider replacing some of these with less correlated assets. This adjustment could enhance the portfolio's ability to withstand market volatility and improve long-term performance.

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.

To optimize risk versus return, consider using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. However, before optimization, it's crucial to address the overlap of highly correlated assets, which limits diversification benefits. Adjusting allocations to include less correlated investments can create a more efficient portfolio. This approach aims to maximize returns for a given level of risk, enhancing overall portfolio performance.

Dividends Info

  • Fidelity 500 Index Fund 1.20%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.60%

The portfolio's overall dividend yield is 1.6%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.6%. Dividends can provide a steady income stream and help offset market volatility. However, the portfolio's yield is modest, reflecting its growth focus. For investors seeking more income, increasing allocation to high-dividend assets or funds may be beneficial. Balancing growth and income can enhance portfolio resilience and provide greater financial flexibility.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.04%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Low costs are a significant advantage, especially when compounded over time. Maintaining this focus on cost-effective investments while exploring additional diversification opportunities can help optimize the portfolio's risk-return profile and support sustainable growth.

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