Highly Diversified Balanced Portfolio with Low Costs and Solid Growth Potential for Moderate Risk Tolerance
Report created on Nov 28, 2024Risk profile
4/7
Diversification profile
5/5
Positions
-
AO iShares Core Aggressive Allocation ETF
AOA - US4642898591 100.00%
The portfolio is entirely invested in the iShares Core Aggressive Allocation ETF, offering a balanced approach with a strong emphasis on diversification. This ETF includes a mix of stocks, bonds, and a small percentage of cash and other assets. The portfolio's risk classification is balanced, suggesting a moderate approach to risk, while its diversification is rated highly. This indicates that the investment is spread across various asset classes and sectors, minimizing the impact of any single investment's poor performance. Maintaining this diversified structure can help protect against volatility while still offering growth opportunities.
Growth
Historically, the portfolio has demonstrated solid performance, with a compound annual growth rate (CAGR) of 8.58%. This suggests that a hypothetical initial investment would have grown steadily over time. However, the maximum drawdown of -28.36% indicates that there have been periods of significant decline, which is typical for balanced portfolios. With 27 days accounting for 90% of returns, it highlights the importance of staying invested during both market highs and lows. The historical performance underscores the potential for long-term growth, though investors should remain prepared for occasional downturns.
Projection
A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations for this portfolio. Assuming a hypothetical initial investment, the results show a wide range of potential outcomes. The 5th percentile projects a modest 37.76% increase, while the 50th percentile suggests a more robust growth of 202.47%. The 67th percentile indicates an impressive 276.99% return, with an annualized return of 9.04% across all simulations. These projections highlight the portfolio's potential for substantial growth, though outcomes may vary based on market conditions.
Asset classes
- Stocks 80%
- Bonds 20%
- Cash 1%
The portfolio's asset allocation is primarily composed of stocks (79.71%) and bonds (19.63%), with minor allocations to cash and other assets. This allocation reflects a growth-oriented strategy, as stocks generally offer higher returns compared to bonds. However, the inclusion of bonds helps to mitigate risk and provide stability during volatile market periods. The small cash allocation provides liquidity, while the minimal presence of other assets adds a slight diversification benefit. To maintain a balanced risk profile, it's crucial to regularly review and adjust the asset allocation as needed.
Sectors
- Technology 25%
- Financials 17%
- Industrials 11%
- Consumer Discretionary 11%
- Health Care 10%
- Telecommunications 7%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 4%
- Real Estate 3%
- Utilities 3%
Sector allocation within the portfolio is diverse, with technology (24.61%) and financial services (16.65%) leading the way. This diversification across multiple sectors, including industrials, consumer cyclicals, and healthcare, reduces exposure to any single sector's downturn. The broad sector coverage ensures that the portfolio can benefit from various economic trends and cycles. It's essential to periodically reassess sector allocations to ensure alignment with market developments and personal investment goals. Maintaining a well-rounded sector allocation can help optimize long-term performance and manage risk.
Regions
- North America 66%
- Europe Developed 15%
- Japan 6%
- Asia Emerging 5%
- Asia Developed 4%
- Australasia 2%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is heavily weighted towards North America (65.79%), with additional exposure to Europe Developed (14.81%) and Japan (5.90%). This distribution reflects a focus on established markets, which generally offer stability and growth potential. The inclusion of emerging markets, though limited, provides access to higher-growth opportunities. This geographic diversification helps to balance risk and return across different regions. Regularly reviewing geographic allocations ensures the portfolio remains aligned with global economic shifts and opportunities, allowing for a more resilient investment strategy.
Dividends
- iShares Core Aggressive Allocation ETF 2.10%
- Weighted yield (per year) 2.10%
With a dividend yield of 2.1%, the portfolio offers a modest income stream alongside potential capital appreciation. This yield is generated primarily from the stock portion of the ETF, providing a steady source of income for investors. While dividends contribute to total returns, they also offer a cushion during market downturns. Reinvesting dividends can further enhance growth over time. It's important to consider the role of dividends in meeting income needs and how they fit into the broader investment strategy. Regularly reviewing dividend policies can help optimize income generation.
Ongoing product costs
- iShares Core Aggressive Allocation ETF 0.15%
- Weighted costs total (per year) 0.15%
The portfolio's cost structure is highly favorable, with a total expense ratio (TER) of 0.15%. This low-cost approach allows more of the investment returns to be retained by the investor, enhancing overall performance. Keeping costs low is a critical component of long-term investment success, as high fees can significantly erode returns over time. By focusing on cost-efficient investment vehicles like ETFs, the portfolio is well-positioned to maximize returns while minimizing expenses. Continually monitoring and managing investment costs can significantly impact the portfolio's net performance.
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