A balanced portfolio with heavy focus on U.S. equities and low geographic diversification

Report created on Dec 8, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is primarily composed of U.S. equity ETFs, with a significant portion invested in dividend-paying stocks and large-cap growth stocks. The Schwab U.S. Dividend Equity ETF and Vanguard S&P 500 ETF dominate the portfolio, comprising over 70% of the total allocation. This composition suggests a focus on stability and growth within established U.S. markets. While this allocation can provide consistent returns, the limited diversification across asset classes and geographies may expose the portfolio to specific market risks. To enhance stability, consider introducing a broader range of asset classes, such as bonds or international equities, to balance potential volatility in the U.S. stock market.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.52%. This impressive growth rate indicates strong past performance, likely driven by the robust performance of U.S. equities in recent years. However, past performance is not a guarantee of future results, as market conditions can change. The maximum drawdown of -32.84% highlights potential volatility, reminding investors of the risks associated with equity-heavy portfolios. To mitigate such risks, consider diversifying into less volatile asset classes or sectors, which could help cushion against future market downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. The median projection suggests a significant increase in portfolio value, but it's important to note that these simulations are based on historical data and assumptions. While the 50th percentile shows a promising outcome, the 5th percentile highlights the possibility of underperformance. To better prepare for future uncertainties, consider stress testing the portfolio under various market scenarios and adjusting the allocation to improve resilience against unfavorable outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is heavily skewed towards stocks, with over 99% in equities and a negligible amount in cash. This concentration in a single asset class can lead to increased volatility and risk, especially during market downturns. Diversifying across different asset classes, such as bonds or real estate, can help reduce risk and provide more stable returns. By incorporating a mix of asset classes, investors can achieve a more balanced risk-return profile, potentially enhancing long-term performance and reducing the impact of market fluctuations.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Health Care
    12%
  • Consumer Discretionary
    10%
  • Industrials
    8%
  • Consumer Staples
    8%
  • Telecommunications
    7%
  • Energy
    6%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is concentrated in the technology sector, which accounts for over 32% of the allocation. While this can lead to substantial gains during periods of tech growth, it also exposes the portfolio to sector-specific risks. Other sectors like financial services and healthcare provide some diversification, but the overall sectoral balance is limited. To mitigate risk, consider reallocating some assets to underrepresented sectors, such as utilities or real estate, which may offer more stability and protection against tech sector volatility.

Regions Info

  • North America
    98%
  • Asia Developed
    1%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with nearly 98% of assets in this region. This lack of international exposure limits diversification and increases vulnerability to U.S. market-specific risks. While the U.S. has been a strong performer historically, global diversification can reduce regional risks and capture growth opportunities in emerging and developed markets outside North America. To enhance geographic diversification, consider adding international ETFs or funds that provide exposure to Europe, Asia, and other regions.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets exhibit high correlation, particularly between the Schwab U.S. Large-Cap Growth ETF and the Vanguard S&P 500 ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. This can increase overall portfolio risk, especially during market downturns. To improve diversification, consider replacing or reducing exposure to highly correlated assets and introducing investments with lower correlation, such as bonds or alternative asset classes, which can help stabilize returns.

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 may benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. Given the current asset composition, there's potential to adjust allocations for improved efficiency. By analyzing the risk-return trade-off of each asset, you can identify an optimal mix that maximizes returns for a given level of risk. Consider reallocating assets to achieve a more efficient portfolio, focusing on reducing overlap and enhancing diversification. This approach can help improve overall performance while managing risk effectively.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 2.50%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.49%

The portfolio's dividend yield stands at 1.49%, primarily driven by the Schwab U.S. Dividend Equity ETF. While dividends provide a steady income stream, the overall yield is relatively modest. To enhance income, consider increasing allocation to higher-yielding assets or funds. However, it's important to balance the quest for yield with the potential for capital appreciation and risk. Diversifying into dividend-paying international stocks might also provide an opportunity to increase yield while adding geographic diversification.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, indicating low costs, which is beneficial for long-term returns. Lower costs mean more of your investment returns are retained, compounding over time. However, the VanEck Semiconductor ETF has a relatively higher expense ratio of 0.35%. To further reduce costs, consider evaluating whether this ETF's performance justifies its higher fees. If not, explore lower-cost alternatives or similar funds with comparable exposure that align with your investment strategy and financial goals.

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