A balanced portfolio with a strong U.S. focus and diverse sector exposure

Report created on Jan 26, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed primarily of U.S. large-cap and small-cap ETFs, making up 66% of the total allocation. International exposure is present but limited, with 30% in various international and emerging markets ETFs. The remaining 4% is invested in a U.S. REIT ETF, providing some real estate exposure. Compared to a typical balanced benchmark, this portfolio leans heavily on U.S. equities. This structure provides robust growth potential, but may lack the diversification benefits from fixed income or alternative assets. Consider adding bonds or other asset classes to balance risk.

Growth Info

Historically, the portfolio has demonstrated strong performance with a CAGR of 12.17%. However, it experienced a maximum drawdown of -35.94%, indicating significant volatility during market downturns. Compared to common benchmarks, this performance is commendable, but the high drawdown suggests the need for risk management strategies. To mitigate future risks, consider incorporating more defensive assets, such as bonds or cash, which can cushion against large market swings and reduce overall volatility.

Projection Info

The forward projection, based on Monte Carlo simulations, shows a wide range of potential outcomes. With 1,000 simulations, the median return is 167.3%, while the 5th percentile is -16.8%. These projections highlight the uncertainty inherent in investing, as they rely on historical data, which may not predict future results accurately. Given this variability, it's crucial to maintain a diversified portfolio and regularly reassess asset allocation to ensure alignment with your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    96%
  • Real Estate
    4%

The portfolio is heavily weighted towards equities, with 96% in stocks and 4% in real estate. This allocation is typical for a growth-oriented strategy, offering potential for high returns. However, it lacks the stability that bonds or cash can provide. Compared to balanced benchmarks, the absence of bonds could increase volatility. Consider introducing fixed-income assets to improve diversification and reduce risk, especially if nearing retirement or needing more consistent returns.

Sectors Info

  • Technology
    22%
  • Financials
    16%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Real Estate
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%

Sector allocation is diverse, with the largest exposure in technology at 22%, followed by financial services and industrials. This composition aligns well with global benchmarks, providing balanced exposure across various industries. However, the technology sector's prominence could lead to increased volatility, especially in times of regulatory changes or interest rate hikes. To maintain sector balance, consider periodically reviewing sector weights and adjusting as needed to avoid overconcentration in any single area.

Regions Info

  • North America
    72%
  • Europe Developed
    10%
  • Asia Emerging
    6%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily skewed towards North America, with 72% exposure. While this focus has historically benefited from strong U.S. market performance, it may limit diversification benefits. Europe and emerging markets have lower representation, potentially missing out on growth opportunities in these regions. To enhance diversification, consider increasing exposure to non-U.S. markets, which could provide a hedge against domestic economic downturns and capture growth in underrepresented regions.

Market capitalization Info

  • Mega-cap
    31%
  • Large-cap
    24%
  • Mid-cap
    19%
  • Small-cap
    18%
  • Micro-cap
    6%

The portfolio is diversified across market capitalizations, with a notable emphasis on mega and big-cap stocks, representing 55% of the portfolio. This distribution reflects a balance between stability and growth potential. Small and micro-cap stocks add a layer of growth opportunity but also increase risk. Compared to benchmarks, this allocation is well-rounded. However, ensure the risk associated with smaller-cap stocks aligns with your investment goals and risk tolerance, as they can be more volatile.

Redundant positions Info

  • Schwab International Small-Cap Equity ETF
    Schwab International Equity ETF
    High correlation

The portfolio exhibits high correlation between certain assets, particularly the Schwab International Small-Cap and International Equity ETFs. This correlation can limit diversification benefits, as these assets may move together during market downturns. To improve risk management, consider diversifying into less correlated assets, which can provide a buffer during volatile periods. A more balanced correlation among portfolio holdings can enhance overall stability and reduce the impact of market shocks.

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 could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the high correlation among some assets suggests room for improvement. By adjusting allocations, particularly reducing overlap in correlated ETFs, you can enhance efficiency. This doesn't necessarily mean adding new assets but reallocating within existing ones for better diversification. Regularly reassess and adjust to maintain optimal efficiency as market conditions and personal goals evolve.

Dividends Info

  • Schwab U.S. Small-Cap ETF 1.50%
  • Schwab International Small-Cap Equity ETF 0.30%
  • Schwab Emerging Markets Equity ETF 3.00%
  • Schwab International Equity ETF 1.90%
  • Schwab U.S. REIT ETF 3.20%
  • Schwab U.S. Large-Cap ETF 1.40%
  • Weighted yield (per year) 1.66%

The portfolio has a total dividend yield of 1.66%, with contributions from various ETFs. The Schwab U.S. REIT ETF offers the highest yield at 3.20%, providing a steady income stream. Dividends can be an essential component for income-focused investors, offering regular returns independent of market fluctuations. If income generation is a priority, consider increasing allocation to dividend-paying assets. However, ensure this aligns with your overall investment strategy and risk tolerance.

Ongoing product costs Info

  • Schwab U.S. Small-Cap ETF 0.04%
  • Schwab International Small-Cap Equity ETF 0.11%
  • Schwab Emerging Markets Equity ETF 0.11%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. REIT ETF 0.07%
  • Schwab U.S. Large-Cap ETF 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio is impressively low at 0.05%, which is beneficial for long-term performance. Lower costs mean more of your investment returns stay in your pocket, compounding over time. Compared to industry averages, these costs are highly competitive. This efficient cost structure supports the portfolio's growth potential. Regularly review expense ratios to ensure they remain low, as even small increases can impact long-term returns significantly, especially in a compounding scenario.

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