Balanced Portfolio with Strong Historical Performance and Moderate Diversification Across Asset Classes and Sectors

Report created on Dec 4, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of four ETFs, each contributing a significant portion to the overall composition. This mix includes Schwab U.S. Dividend Equity ETF and Vanguard S&P 500 ETF, each at about 33%, and Invesco QQQ Trust and Vanguard FTSE Emerging Markets Index Fund ETF Shares, each at about 17%. This balanced distribution across well-known ETFs indicates a moderately diversified approach, focusing primarily on U.S. equities with a touch of emerging markets exposure. A well-rounded ETF selection helps mitigate risks associated with individual stock investments, offering a stable foundation for growth.

Growth Info

Historically, the portfolio has performed impressively with a CAGR of 13.06% and a max drawdown of -31.89%. The fact that only 33 days account for 90% of returns suggests that the portfolio has experienced significant gains during short periods. This highlights the importance of maintaining a long-term perspective to capture these gains. Although the max drawdown indicates vulnerability to market fluctuations, the overall performance showcases resilience and potential for growth over time. Staying invested during volatile periods is crucial to capitalize on the portfolio's strengths.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows promising forward projections. The 5th percentile indicates a potential 42.21% return, while the median (50th percentile) projects a 385.24% return. The 67th percentile suggests even higher returns at 559.56%. With 986 simulations yielding positive returns, the portfolio's annualized return stands at 13.6%. This analysis provides a probabilistic view of future performance, emphasizing the benefits of maintaining a diversified portfolio. Investors should remain optimistic about potential growth while considering potential risks.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising over 99% of the total allocation, with minimal cash and other assets. This concentration in equities aligns with a growth-oriented strategy, suitable for investors seeking capital appreciation. While this approach offers the potential for high returns, it also exposes the portfolio to market volatility. To enhance stability, consider incorporating a small allocation to fixed-income securities, which can provide a buffer against equity market downturns and reduce overall portfolio risk.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    8%
  • Energy
    6%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio is diversified across several sectors, with a significant emphasis on technology, financial services, and consumer cyclicals. Technology accounts for over 26% of the portfolio, reflecting a strong focus on growth-oriented industries. While this sector allocation can drive impressive returns, it also introduces sector-specific risks. Balancing exposure across additional sectors, such as utilities or real estate, could enhance diversification and reduce vulnerability to sector-specific downturns. A more balanced sector allocation can help stabilize returns over varying market conditions.

Regions Info

  • North America
    83%
  • Asia Emerging
    10%
  • Asia Developed
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly invested in North America, making up over 82% of the allocation. This concentration reflects a strong focus on U.S. markets, with limited exposure to emerging markets in Asia, Africa, and Latin America. While this regional focus leverages the strength of developed markets, it also limits diversification benefits from international exposure. To mitigate geographic concentration risk, consider gradually increasing exposure to other regions. A more globally diversified approach can provide additional growth opportunities and reduce reliance on a single market.

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's optimization chart suggests potential for improvement by adjusting along the efficient frontier. To achieve a riskier portfolio, consider increasing exposure to higher volatility assets, while a more conservative approach could involve adding fixed-income securities. Before optimizing, focus on enhancing diversification across sectors and regions to reduce concentration risks. Once a well-diversified foundation is established, explore optimization strategies to align the portfolio with your risk tolerance and financial goals. This approach ensures a balanced, efficient portfolio tailored to individual preferences.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 2.03%

The portfolio's dividend yield stands at 2.03%, with contributions from all four ETFs. The Schwab U.S. Dividend Equity ETF offers the highest yield at 3.3%, providing a steady income stream. While the yield is modest, it adds an element of stability and can help offset market volatility. For investors seeking higher income, consider exploring options to increase dividend exposure while maintaining a balanced approach. A focus on dividend growth stocks could enhance income potential without sacrificing long-term growth prospects.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is a low 0.08%, indicating cost-effectiveness. Each ETF has competitive expense ratios, with the Vanguard S&P 500 ETF being the lowest at 0.03%. Low costs are crucial for maximizing net returns, as high fees can erode gains over time. Maintaining a focus on cost-efficient investments is essential for long-term success. Regularly review expense ratios and explore opportunities to reduce costs further. By prioritizing low-cost options, investors can enhance their portfolio's overall performance and achieve their financial goals.

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