A focused portfolio with high exposure to US equities and emphasis on dividend income

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits an investor with a moderate risk tolerance seeking growth through U.S. equities, with a supplementary income through dividends. The investor likely has a long-term investment horizon, allowing them to weather the volatility associated with a stock-focused portfolio. This strategy is well-suited for those comfortable with the inherent risks of the stock market and looking for substantial growth potential, coupled with a steady income stream from dividends.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    80.00%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    20.00%

This portfolio is heavily concentrated in U.S. equities, with 80% allocated to the Vanguard S&P 500 ETF and 20% to the Schwab U.S. Dividend Equity ETF. This composition indicates a strong preference for large-cap stocks that are listed on major American stock exchanges. The portfolio's diversification is low, given its exclusive investment in stocks, particularly within a single country's market. This concentration in U.S. equities and the lack of asset class diversification could expose the portfolio to higher volatility and country-specific risks.

Growth Info

Historically, the portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 14.93%, with a maximum drawdown of -33.76%. This performance suggests that while the portfolio has the potential for high returns, it also bears significant risk, as evidenced by the substantial drawdown. The days contributing to 90% of returns are notably few, indicating that much of the portfolio's performance can be attributed to short periods of significant gains. This pattern underscores the importance of staying invested over the long term to capture these critical periods.

Projection Info

The Monte Carlo simulation, with 1,000 iterations, predicts a wide range of outcomes for the portfolio. The 5th percentile outcome at 107.2% suggests a minimal gain scenario, while the median (50th percentile) projection at 513.9% and the 67th percentile at 711.2% indicate substantial potential for growth. The simulation shows a high likelihood of positive returns, with 996 out of 1,000 simulations ending in gain. However, it's crucial to remember that Monte Carlo simulations are based on historical data and assumptions, so they cannot guarantee future performance.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio is entirely invested in stocks, with no allocation to other asset classes such as bonds, real estate, or commodities. This singular focus on equities enhances growth potential but also increases volatility and risk, especially during market downturns. Diversifying across different asset classes can help mitigate risk and smooth out returns over time.

Sectors Info

  • Technology
    30%
  • Financials
    13%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Consumer Staples
    8%
  • Industrials
    8%
  • Energy
    6%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

The sector allocation within the portfolio shows a heavy weighting towards technology, financial services, and healthcare. These sectors can offer growth opportunities but may also be susceptible to sector-specific risks. For instance, technology stocks often experience higher volatility related to product cycles and regulatory changes. Balancing sector exposures can reduce the impact of any single sector's downturn on the portfolio's overall performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%
  • Asia Developed
    0%
  • Latin America
    0%

Geographically, the portfolio is almost entirely invested in North America, with a negligible exposure to developed Europe. This geographic concentration in the U.S. market limits global diversification and increases exposure to country-specific economic and political risks. Expanding geographic exposure could provide access to growth opportunities in other regions and economies, potentially enhancing returns and reducing risk.

Market capitalization Info

  • Large-cap
    39%
  • Mega-cap
    37%
  • Mid-cap
    21%
  • Small-cap
    2%
  • Micro-cap
    0%

The portfolio's market capitalization breakdown shows a preference for big and mega-cap stocks, which tend to be more stable and less volatile than smaller companies. However, this focus may limit exposure to high-growth potential offered by smaller firms. Including a broader mix of market caps can diversify risk and potentially enhance returns.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.70%

The dividend yield of the portfolio, averaging 1.70%, contributes to its total return. The Schwab U.S. Dividend Equity ETF, with a higher yield of 3.70%, boosts income generation, complementing the growth focus of the Vanguard S&P 500 ETF. This blend of growth and income can be particularly appealing for investors seeking both capital appreciation and cash flow.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.04%. Low costs are crucial for long-term investment success, as they directly enhance net returns. The choice of low-cost ETFs demonstrates a cost-effective approach to investing, which is commendable.

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.

Considering the portfolio's current composition and performance, optimizing for the Efficient Frontier could involve diversifying across more asset classes and geographies. This optimization aims to achieve the best possible risk-return ratio by adjusting asset allocations, potentially enhancing returns for a given level of risk. However, it's important to align any changes with the investor's risk tolerance and investment goals.

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