Balanced Portfolio with Strong U.S. Focus and Moderate Risk Suitable for Growth-Oriented Investors

Report created on Dec 5, 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 composed entirely of ETFs, with a strong focus on U.S. equities, making up 89.86% of the geographic allocation. It is moderately diversified across sectors, with technology being the largest allocation at 30.31%. This setup provides a solid foundation for growth but may lack some international exposure. The portfolio's risk classification is balanced, with a risk score of 4 out of 7, indicating moderate risk. To enhance diversification, consider increasing exposure to international markets and other asset classes like bonds.

Growth Info

Historically, this portfolio has delivered impressive performance with a compound annual growth rate (CAGR) of 15.51%. However, it also experienced a maximum drawdown of -25.48%, highlighting its vulnerability to market downturns. This performance suggests that while the portfolio can deliver strong returns, it is not immune to significant losses during volatile periods. To mitigate potential drawdowns, consider strategies such as diversifying across asset classes or implementing hedging techniques to protect against downside risks.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. Assuming a hypothetical initial investment, the median outcome (50th percentile) suggests a potential growth of 642.1%, with a 5th percentile outcome of 126.85% and a 67th percentile of 959.99%. The high number of simulations with positive returns (997 out of 1,000) indicates a favorable outlook. However, remember that simulations are based on historical data and assumptions, and actual future performance can vary. Regularly review and adjust the portfolio to align with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

With 99.74% of the portfolio allocated to stocks, there is a clear focus on equity investments. This heavy stock allocation can drive growth but also increases exposure to market volatility. The remaining minor allocations in cash and other categories offer minimal diversification benefits. To better balance risk and reward, consider incorporating other asset classes, such as bonds, which can provide stability and income during market downturns. This approach can help cushion the portfolio against fluctuations and enhance overall risk-adjusted returns.

Sectors Info

  • Technology
    30%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    9%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio's sector allocation is heavily weighted towards technology, making up over 30% of the total. Other significant sectors include financial services and consumer cyclicals. While this concentration in technology can drive growth in a booming tech market, it also exposes the portfolio to sector-specific risks. A more balanced sector distribution could enhance diversification and reduce vulnerability to sector downturns. Consider gradually increasing exposure to underrepresented sectors, such as utilities and real estate, to achieve a more even distribution across various industries.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for nearly 90% of the allocation. This strong regional focus can benefit from the robust U.S. market but may miss out on opportunities in other regions. To achieve a more globally diversified portfolio, consider increasing allocations to emerging markets and other developed regions. This strategy can capture growth in different economic cycles and reduce dependency on the U.S. market. A more balanced geographic distribution can enhance long-term returns and mitigate regional risks.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Invesco NASDAQ 100 ETF
    High correlation

The portfolio includes highly correlated assets, particularly between the Schwab U.S. Large-Cap Growth ETF and the Invesco NASDAQ 100 ETF. High correlation means these assets tend to move in the same direction, reducing the diversification benefits. To improve diversification, consider replacing one of these ETFs with an asset that offers different market exposure or risk characteristics. This approach can help reduce portfolio volatility and enhance risk-adjusted returns by spreading investments across a broader range of assets with varying correlations.

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 the portfolio, consider addressing the overlap of highly correlated assets first. Reducing redundancy can enhance diversification benefits. Once this is done, explore moving along the efficient frontier to adjust the risk-return profile. For a riskier portfolio, increase exposure to growth-oriented assets. Conversely, for a more conservative approach, allocate more to income-generating or defensive assets. This strategic adjustment allows for better alignment with personal risk tolerance and investment goals. Regularly reassess the portfolio to ensure it continues to meet evolving financial objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.58%

The portfolio's overall dividend yield is 1.58%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.4%. While dividends can provide a steady income stream, the portfolio's focus remains on growth-oriented assets. To increase income potential, consider allocating a larger portion to dividend-focused ETFs or stocks. This strategy can provide cash flow during volatile markets and enhance total returns. However, ensure that any changes align with the overall investment strategy and risk tolerance, maintaining a balance between growth and income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • 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%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, which is relatively low and cost-effective. The Vanguard Total Stock Market Index Fund ETF Shares has the lowest cost at 0.03%, while the Avantis U.S. Small Cap Value ETF is the most expensive at 0.25%. Keeping costs low is crucial for maximizing net returns over time. Regularly review the expense ratios of the ETFs and consider swapping higher-cost funds for lower-cost alternatives with similar exposures. This cost-conscious approach can enhance long-term performance and contribute to achieving financial goals.

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