A well-diversified balanced portfolio with a focus on US equities and moderate risk exposure

Report created on Jan 13, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio consists of a mix of equity and bond funds, with a significant 85.98% allocation to stocks and 11.97% to bonds. This composition aligns with a balanced investment strategy, typically aiming for growth while managing risk through fixed-income exposure. Compared to common benchmarks, this allocation leans slightly more towards equities, which could lead to higher volatility but also potential for greater returns. To maintain balance, consider periodically reviewing the equity-to-bond ratio, especially during significant market shifts, to ensure it aligns with your financial goals and risk tolerance.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 10.72%, which is impressive and suggests strong past performance. However, it experienced a maximum drawdown of -31.4%, indicating significant declines during market downturns. This volatility is typical for equity-heavy portfolios. Comparing this to benchmarks, the returns are competitive, but the risk is also evident. While past performance can guide expectations, it's crucial to remember that it doesn't guarantee future results. Regularly revisiting your risk tolerance and ensuring it aligns with your portfolio's volatility is advisable.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, indicate a median potential growth of 190.24% over a specified period. This method provides a range of possibilities, with the 5th percentile showing a potential loss of -15.4% and the 67th percentile suggesting growth up to 329.29%. While these simulations offer valuable insights, they are based on historical trends and assumptions, so they should be considered as one of many tools in decision-making. Regularly reviewing projections and adjusting your strategy as needed can help manage expectations and risks.

Asset classes Info

  • Stocks
    86%
  • Bonds
    12%
  • Cash
    2%
  • Other
    1%

The portfolio's allocation across asset classes is heavily weighted towards stocks, with bonds and a small percentage in cash and other assets. This stock-heavy allocation can drive growth but also adds volatility. Compared to typical balanced benchmarks, which often have a more even split between stocks and bonds, this portfolio leans towards equities. While this can be beneficial in bull markets, consider increasing bond allocation if you seek more stability or are approaching a financial goal. A diversified mix can help cushion against market fluctuations.

Sectors Info

  • Technology
    23%
  • Financials
    13%
  • Industrials
    12%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    5%
  • Basic Materials
    4%
  • Consumer Staples
    4%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is diversified across multiple sectors, with a notable concentration in technology at 23.47%. This aligns with current market trends where tech is a dominant force but comes with higher volatility, especially during interest rate changes. Other sectors like financial services and industrials provide balance, though their weights are lower. This sectoral mix is generally well-rounded, reflecting a broad market exposure. However, periodically reassessing sector weights to ensure they align with market conditions and personal risk tolerance can enhance diversification and stability.

Regions Info

  • North America
    62%
  • Europe Developed
    14%
  • No data
    12%
  • Japan
    4%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, with 62.4% exposure, followed by Europe Developed and a small percentage in other regions. This focus on North America aligns with many global benchmarks but may limit exposure to emerging markets' growth opportunities. While this allocation provides stability, consider diversifying further into underrepresented regions to capture potential growth and reduce regional risk. A global perspective in asset allocation can enhance diversification and potentially improve returns over time.

Redundant positions Info

  • Fidelity Diversified International K6 Fu
    FIDELITY TOTAL INTERNATIONAL INDEX FUND INSTITUTIONAL PREMIUM CLASS
    High correlation

The portfolio includes highly correlated assets, particularly between the Fidelity Diversified International K6 Fund and the Fidelity Total International Index Fund. High correlation means these funds tend to move together, which can limit diversification benefits. During market downturns, this could result in greater overall portfolio risk. To improve diversification, consider replacing one of these funds with an asset that offers lower correlation, thereby potentially reducing risk and enhancing portfolio resilience against market volatility.

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.

Optimizing the portfolio using the Efficient Frontier could potentially improve the risk-return ratio by adjusting current asset allocations. This approach identifies the best possible balance between risk and return based on historical data. However, before optimization, consider addressing the high correlation between certain assets to ensure true diversification benefits. Remember, optimization is based on existing assets and does not account for external factors or future market conditions, so maintaining flexibility in your strategy is important.

Dividends Info

  • BAIRD CORE PLUS BOND FUND INVESTOR 2.90%
  • Fidelity 500 Index Fund 1.30%
  • Weighted yield (per year) 0.62%

The portfolio's dividend yield is relatively modest at 0.62%, with the Baird Core Plus Bond Fund contributing the highest yield at 2.9%. Dividends provide a steady income stream, which can be especially appealing during market downturns or for income-focused investors. While the yield is not a primary driver of returns in this growth-oriented portfolio, reinvesting dividends can enhance long-term compounding. If income is a priority, consider increasing exposure to higher-yielding assets, balancing this with the overall growth strategy.

Ongoing product costs Info

  • BAIRD CORE PLUS BOND FUND INVESTOR 0.55%
  • Fidelity Growth Company K6 Fund 0.45%
  • Fidelity Diversified International K6 Fu 0.60%
  • FIDELITY TOTAL INTERNATIONAL INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.06%
  • Fidelity 500 Index Fund 0.02%
  • JANUS ENTERPRISE FUND CLASS N 0.66%
  • WELLS FARGO SPECIAL MID CAP VALUE FUND CLASS R6 0.70%
  • Weighted costs total (per year) 0.39%

The portfolio's total expense ratio (TER) is 0.39%, which is relatively low, supporting better long-term performance by reducing cost drag on returns. The Fidelity 500 Index Fund stands out with the lowest cost at 0.02%, while the Wells Fargo Special Mid Cap Value Fund is the highest at 0.7%. Keeping costs low is crucial for maximizing net returns. Regularly reviewing and comparing fund expenses can help identify opportunities to switch to lower-cost alternatives, further enhancing portfolio efficiency and performance.

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