A balanced US heavy equity portfolio with dividend and growth tilts

Report created on Aug 11, 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 is concentrated in four ETFs with 40% in a total US market ETF 25% in developed international equities and two U.S. equity-focused ETFs at 17.5% each. This results in a roughly three‑way split between broad US exposure a developed markets sleeve and style‑tilt US funds. Notable overlap exists because a total market fund already contains many large caps which the other U.S. ETFs also hold. Overlap matters because holding multiple funds with the same underlying holdings reduces diversification and can boost unintended concentration. Recommendation: simplify where holdings overlap trim redundant exposures and reallocate to broaden risk sources.

Growth Info

Historically the portfolio shows a strong compounded annual growth rate (CAGR) of 13.98% with a maximum drawdown of -33.61%. CAGR, or Compound Annual Growth Rate, measures average yearly growth like average speed over a trip. The high CAGR indicates strong past equity returns but the large drawdown highlights volatility and periodic losses. Past performance is informative but not predictive. Recommendation: accept that strong historical returns came with notable drops and ensure position sizing and rebalancing rules are in place to manage downside risk rather than assuming the same returns will repeat.

Projection Info

A Monte Carlo simulation was run with 1,000 scenarios to project potential future outcomes based on historical returns and volatility. Monte Carlo simulates many possible future paths by randomly combining historical patterns to show a range of outcomes rather than one forecast. The results show a wide dispersion with a 5th percentile outcome below starting value and a median outcome much higher which reflects both upside potential and tail risk. Simulations rely on historical behavior and assumptions so they don’t guarantee future returns. Recommendation: use these projections to set realistic goals and to size positions consistent with risk tolerance.

Asset classes Info

  • Stocks
    100%

This portfolio is 100% equities with no allocation to bonds cash or alternative assets which increases return potential but also raises volatility and sequence‑of‑returns risk. Having only one asset class means diversification benefits from uncorrelated sources are missing; bonds or alternatives typically reduce portfolio swings. In simple terms think of diversification as not putting all your eggs in one basket. Recommendation: consider introducing non‑equity assets or cash equivalents to smooth volatility and provide funding for rebalancing during downturns while aligning any additions with your time horizon.

Sectors Info

  • Technology
    26%
  • Financials
    14%
  • Health Care
    11%
  • Industrials
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Consumer Staples
    7%
  • Energy
    6%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector exposure is tilted toward technology financials and healthcare with nine sectors represented at material levels and a modest presence in defensive areas. Sector weights matter because different industries react differently to economic cycles and policy changes; for example growth-oriented sectors can be more sensitive to interest‑rate shifts. The portfolio’s sector mix broadly resembles common equity benchmarks but leans technology which may increase cyclical swings. Recommendation: monitor sector concentration and rebalance periodically to avoid unintended sector bets and ensure sector weights reflect intended risk exposures rather than the byproduct of overlapping funds.

Regions Info

  • North America
    75%
  • Europe Developed
    16%
  • Japan
    6%
  • Australasia
    2%
  • Asia Developed
    1%

Geographic exposure is heavily skewed to North America at about 75% with smaller allocations to developed Europe and Japan and negligible emerging market exposure. Geographic diversification can reduce region‑specific political economic and currency risk by spreading exposure across different economies. The current tilt aligns with many US investors’ home bias which historically has been rewarded but may miss diversification benefits from other regions. Recommendation: evaluate whether the domestic bias aligns with long‑term goals and consider modest additions of distinct regional exposures or hedging strategies to reduce single‑market concentration.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    36%
  • Mid-cap
    17%
  • Small-cap
    4%
  • Micro-cap
    1%

Market cap exposure favors mega and large caps which together make up roughly three‑quarters of the portfolio with mid and small caps underrepresented. Larger cap companies typically offer more stability and liquidity while smaller caps can provide higher growth potential but also higher volatility. The current profile benefits from liquidity and broad coverage of dominant firms but may lack the size‑based diversification that can capture different return drivers. Recommendation: if the goal includes higher potential growth and small cap premium consider a measured allocation to mid or small cap exposures while monitoring liquidity and turnover implications.

Redundant positions Info

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

Two U.S. equity ETFs in the portfolio are identified as highly correlated meaning they tend to move together historically reducing diversification benefits. Correlation measures how similarly assets move where a value near 1 means they move together and near -1 means they move opposite; think of it as dance partners moving in step. High correlation is important because during downturns correlated assets can fall together increasing portfolio losses. Recommendation: reduce or replace overlapping holdings to improve diversification and focus on combining assets with lower historical correlation to better smooth returns across market cycles.

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.

Optimization using the Efficient Frontier can improve the portfolio’s risk‑return tradeoff based on the current set of assets and allowable weight changes. The Efficient Frontier is a concept that shows portfolios offering the highest expected return for a given level of risk like finding the most efficient route for a given travel time. Optimization here should begin by removing highly overlapping assets since duplicates limit the frontier. Recommendation: run a constrained optimization after trimming correlated positions to identify allocations that maximize return per unit of risk while respecting liquidity and investment objectives.

Dividends Info

  • iShares MSCI EAFE ETF 2.70%
  • Schwab U.S. Dividend Equity ETF 2.80%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.10%
  • Weighted yield (per year) 1.66%

The portfolio’s blended yield is about 1.66% with higher yields from the dividend‑focused ETF and lower yields from growth exposure. Dividend yield is the annual income divided by price giving a sense of cash return from holdings; it can provide income and cushion during low price returns. For an equity‑only allocation dividends contribute modestly to total return and are useful for income oriented goals or for reinvestment to compound returns. Recommendation: if income is a priority consider increasing higher‑yielding allocations or a structured withdrawal plan while balancing the tradeoff with long‑term growth potential.

Ongoing product costs Info

  • iShares MSCI EAFE ETF 0.33%
  • 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) 0.11%

The portfolio’s total expense ratio (TER) is low at roughly 0.11% driven by inexpensive ETFs which supports net returns over time. Costs are important because lower fees mean more of the market return stays invested with you; even small differences compound significantly over decades. The one fund with a higher fee stands out as a potential opportunity for savings. Recommendation: review each fund’s fee against similar low‑cost alternatives and consider consolidating into lower cost vehicles where it does not reduce diversification or increase unintended concentration.

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