Balanced portfolio with strong focus on US equities and low geographic diversification

Report created on Jan 15, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio comprises primarily ETFs and a few individual stocks, with a heavy emphasis on US equities. The top two holdings, Invesco NASDAQ 100 ETF and SPDR S&P 500 ETF Trust, make up over 65% of the portfolio. This composition mirrors a typical balanced portfolio, focusing on major indices. While this provides stability and growth potential, the lack of exposure to other regions or asset classes could limit diversification. To enhance diversification, consider adding international equities or alternative asset classes like bonds.

Growth Info

Historically, the portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 13.98%. This suggests robust growth over time, outperforming many traditional benchmarks. However, the maximum drawdown of -20.94% indicates vulnerability during market downturns. It's crucial to remember that past performance does not guarantee future results. To mitigate future risks, consider diversifying into less correlated assets, which may help cushion the portfolio during volatile periods.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential outcomes, indicates a wide range of future returns. With a median projection of 324.95% and a high probability of positive returns, the outlook is generally favorable. However, the 5th percentile shows a potential downside of 21.9%, highlighting the inherent uncertainty in projections. To manage this risk, periodically review asset allocations and adjust according to changing market conditions and personal risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising nearly 100% of the assets, with minimal cash holdings. This concentration in a single asset class can lead to increased volatility, especially during market downturns. While stocks offer growth potential, introducing bonds or other asset classes could provide more stability and income. A more diversified asset allocation might better align with a balanced risk profile, potentially reducing overall portfolio risk.

Sectors Info

  • Technology
    29%
  • Health Care
    15%
  • Consumer Discretionary
    10%
  • Telecommunications
    9%
  • Consumer Staples
    8%
  • Industrials
    8%
  • Financials
    7%
  • Energy
    6%
  • Real Estate
    5%
  • Basic Materials
    1%
  • Utilities
    1%

The sector allocation shows a significant concentration in technology, healthcare, and consumer cyclicals, which collectively form over 50% of the portfolio. While these sectors have historically driven growth, they may also introduce higher volatility, especially in times of economic uncertainty. To ensure a balanced approach, consider reallocating some investments to underrepresented sectors like utilities or basic materials, which can offer stability and potential income.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is overwhelmingly focused on North America, accounting for nearly 99% of the assets. This lack of international diversification may increase vulnerability to regional economic downturns. While US markets have been strong performers, adding exposure to developed and emerging markets could provide growth opportunities and reduce geographic risk. Diversifying geographically can help capture growth in other regions and enhance overall portfolio resilience.

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 could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This process involves adjusting the asset allocation to maximize returns for a given level of risk. By reallocating between existing assets, it's possible to enhance efficiency without necessarily diversifying further. Regularly revisiting the portfolio's allocation can ensure it remains aligned with personal goals and market conditions.

Dividends Info

  • Chevron Corp 4.20%
  • Johnson & Johnson 3.40%
  • Lockheed Martin Corporation 2.60%
  • Realty Income Corp 5.90%
  • PepsiCo Inc 3.70%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • SPDR S&P 500 ETF Trust 0.90%
  • UnitedHealth Group Incorporated 1.50%
  • Weighted yield (per year) 1.73%

The portfolio's dividend yield stands at 1.73%, with contributions from both ETFs and individual stocks. While not exceptionally high, dividends can provide a steady income stream, which is valuable for investors seeking regular cash flow. Enhancing the dividend yield could involve reallocating towards higher-yielding sectors or specific dividend-focused funds. Balancing growth with income-generating assets can help achieve a more stable return profile over time.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of the portfolio is low at 0.09%, indicating cost-efficient management. Low costs are beneficial for long-term performance, as they allow more of the portfolio's returns to be retained. This cost structure aligns well with best practices, ensuring that expenses do not erode investment gains. Continue to monitor fees and explore opportunities to reduce costs further, such as switching to lower-cost funds, if available.

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