A highly diversified growth-focused portfolio with strong U.S. and international equity exposure

Report created on Jan 12, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, comprising over 90% of the total allocation. It includes a mix of large-cap, small-cap, and international ETFs, with a minor allocation to bonds and real estate. This composition aligns well with a growth-focused strategy, aiming for capital appreciation. Compared to typical benchmarks, this portfolio shows a higher equity concentration. This focus on equities can yield higher returns but also increases volatility. Consider maintaining a balanced approach by reviewing the bond allocation to ensure it aligns with your risk tolerance and investment goals.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 11.19%, indicating robust past performance. However, it also experienced a significant maximum drawdown of -36.8%, highlighting its vulnerability during market downturns. This historical data underscores the risk-reward dynamic inherent in growth portfolios. While past performance is not indicative of future results, understanding these trends helps set realistic expectations. To manage risk, consider implementing strategies such as dollar-cost averaging or maintaining a cash reserve to capitalize on market dips.

Projection Info

Monte Carlo simulations, which use historical data to estimate future outcomes, suggest varied potential returns for this portfolio. With a median projection of 105.35% and a positive return in 786 out of 1,000 simulations, the outlook is cautiously optimistic. However, the 5th percentile projection shows a potential loss of -58.36%, emphasizing the inherent uncertainty in projections. These simulations provide a range of possible outcomes, but they are not guarantees. Regularly review and adjust your portfolio to adapt to changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    93%
  • Bonds
    5%
  • Real Estate
    2%

The portfolio's asset class distribution is heavily skewed towards stocks, with minimal exposure to bonds, real estate, and cash. This high equity allocation supports a growth strategy but may expose the portfolio to increased volatility. Compared to typical balanced portfolios, this one has a lower bond allocation, which can provide stability during market downturns. Consider gradually increasing bond exposure to enhance stability and reduce overall risk, particularly if nearing retirement or other financial goals with a shorter horizon.

Sectors Info

  • Technology
    17%
  • Financials
    16%
  • Industrials
    12%
  • Consumer Discretionary
    10%
  • Health Care
    8%
  • Real Estate
    7%
  • Telecommunications
    6%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    5%
  • Utilities
    3%
  • Consumer Discretionary
    1%

Sector allocation shows a balanced distribution across technology, financial services, and industrials, with notable exposure to consumer cyclicals and healthcare. This diversification aligns with common benchmarks and can mitigate sector-specific risks. However, the concentration in technology and financial services may lead to increased volatility, especially during economic shifts. To maintain sector balance, periodically review and adjust allocations based on emerging trends and economic forecasts, ensuring alignment with your long-term investment strategy.

Regions Info

  • North America
    55%
  • Europe Developed
    13%
  • Asia Emerging
    9%
  • Japan
    7%
  • Asia Developed
    6%
  • Africa/Middle East
    2%
  • Australasia
    2%
  • Latin America
    2%

Geographic allocation is centered on North America, with significant exposure to developed Europe and Asia. This aligns with common benchmarks, providing a solid mix of developed and emerging markets. However, the relatively low exposure to regions like Latin America and Africa may limit growth potential. Geographic diversification can help manage risks associated with regional economic fluctuations. Consider increasing exposure to underrepresented regions to enhance diversification and capitalize on potential growth opportunities in emerging markets.

Redundant positions Info

  • Schwab Fundamental U.S. Small Company Index ETF
    Schwab U.S. Small-Cap ETF
    High correlation
  • Schwab Fundamental International Small Company Index ETF
    Schwab Fundamental International Large Company Index ETF
    Schwab International Small-Cap Equity ETF
    Schwab International Equity ETF
    High correlation
  • Schwab U.S. Large-Cap ETF
    Schwab S&P 500 Index Fund
    High correlation

The portfolio contains several highly correlated asset groups, particularly among U.S. and international equities. This correlation suggests that these assets may move together during market changes, limiting diversification benefits. While correlation is inevitable in diversified portfolios, excessive overlap can reduce risk management effectiveness. Consider reducing exposure to highly correlated assets and replacing them with alternatives that offer better diversification, such as different asset classes or regions, to enhance overall portfolio resilience.

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 potential for risk vs. return optimization exists through the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. However, the presence of highly correlated assets suggests a need for initial adjustments. By reducing overlap and diversifying asset classes, the portfolio can be more efficiently positioned. Consider consulting with a financial advisor to explore optimization strategies, ensuring alignment with your risk tolerance and investment goals while maximizing potential returns.

Dividends Info

  • Schwab Fundamental U.S. Small Company Index ETF 1.40%
  • Schwab Fundamental International Small Company Index ETF 0.80%
  • Schwab Fundamental Emerging Markets Large Company Index ETF 5.00%
  • Schwab Fundamental International Large Company Index ETF 4.10%
  • Schwab Fundamental U.S. Large Company Index ETF 3.00%
  • Xtrackers International Real Estate ETF 2.20%
  • Schwab U.S. Small-Cap ETF 2.20%
  • Schwab International Small-Cap Equity ETF 0.30%
  • Schwab Emerging Markets Equity ETF 3.10%
  • Schwab International Equity ETF 1.00%
  • Schwab U.S. REIT ETF 3.40%
  • Schwab 5-10 Year Corporate Bond ETF 6.20%
  • Schwab U.S. Large-Cap ETF 2.10%
  • Schwab S&P 500 Index Fund 1.20%
  • Vanguard Mortgage-Backed Securities Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 2.59%

The portfolio's dividend yield is 2.59%, contributing a modest income stream. This yield is supported by higher-yielding assets like corporate bonds and emerging market ETFs. Dividends can provide a stable income source, especially in volatile markets, and reinvested dividends can enhance long-term growth. Ensure the dividend yield aligns with your income needs and reinvestment strategy. Consider focusing on higher-yielding assets if income generation is a priority, while maintaining a balance with growth-oriented investments.

Ongoing product costs Info

  • Schwab Fundamental U.S. Small Company Index ETF 0.25%
  • Schwab Fundamental International Small Company Index ETF 0.39%
  • Schwab Fundamental Emerging Markets Large Company Index ETF 0.39%
  • Schwab Fundamental International Large Company Index ETF 0.25%
  • Schwab Fundamental U.S. Large Company Index ETF 0.25%
  • Xtrackers International Real Estate ETF 0.10%
  • 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 5-10 Year Corporate Bond ETF 0.03%
  • Schwab U.S. Large-Cap ETF 0.03%
  • Schwab S&P 500 Index Fund 0.02%
  • Vanguard Mortgage-Backed Securities Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.17%

With a Total Expense Ratio (TER) of 0.17%, the portfolio's costs are impressively low, supporting better long-term performance by minimizing fee-related drag on returns. Low costs are a significant advantage, allowing more of your investment to compound over time. Continuously monitor expense ratios to ensure they remain competitive. Consider replacing higher-cost assets with lower-cost alternatives, such as index funds or ETFs, to further enhance cost efficiency and maximize returns over the investment horizon.

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