Balanced Diversified Dividend-Focused Portfolio with Moderate Risk and Strong Geographic Coverage

Report created on Dec 3, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of five ETFs, each contributing to a diversified and balanced investment strategy. With 30% allocated to both iShares Core Dividend Growth ETF and iShares International Dividend Growth ETF, it emphasizes dividend growth. Schwab U.S. and International Dividend Equity ETFs together make up 30%, while The Real Estate Select Sector SPDR Fund accounts for 10%. This allocation provides a solid mix of domestic and international dividend-focused equities, with a touch of real estate exposure. The portfolio's composition is well-rounded, making it suitable for a balanced investment approach.

Growth Info

Historically, the portfolio has shown a compound annual growth rate (CAGR) of 7.1%, which is a respectable return for a balanced portfolio. The maximum drawdown was -22.26%, indicating a moderate level of risk during market downturns. With only 9 days making up 90% of returns, it suggests that the portfolio has experienced some volatility, yet it has managed to deliver consistent growth over time. Maintaining this performance trajectory would require continued attention to diversification and risk management.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method uses random sampling to model potential future outcomes. The results show a median return of 125.74% at the 50th percentile, with 930 simulations yielding positive returns. The annualized return across all simulations is 7.18%, which aligns with the historical CAGR. These projections suggest a favorable outlook, but it's important to remain aware of potential risks and market fluctuations.

Asset classes Info

  • Stocks
    90%
  • Real Estate
    10%

The portfolio is mainly composed of equities, with 89.66% in stocks and 10% in real estate, leaving a minimal 0.34% in cash. This allocation reflects a focus on growth through equities, while the real estate component adds a layer of diversification. The heavy stock allocation indicates a preference for capital appreciation and income through dividends. To maintain a balanced risk profile, it's crucial to monitor market conditions and consider adjusting asset class weights if needed to align with changing financial goals.

Sectors Info

  • Financials
    20%
  • Health Care
    13%
  • Industrials
    11%
  • Real Estate
    10%
  • Consumer Staples
    10%
  • Technology
    10%
  • Energy
    7%
  • Utilities
    6%
  • Consumer Discretionary
    6%
  • Telecommunications
    4%
  • Basic Materials
    4%

Sector-wise, the portfolio is well-diversified across various industries. The largest allocations are in Financial Services, Healthcare, and Industrials, with significant investments in Consumer Defensive and Technology as well. This broad sector spread helps mitigate risks associated with any single industry downturn. The inclusion of the Real Estate Select Sector SPDR Fund further diversifies sector exposure. Keeping an eye on sector performance and adjusting allocations as necessary can help optimize returns and manage risks effectively.

Regions Info

  • North America
    62%
  • Europe Developed
    21%
  • Japan
    8%
  • Asia Emerging
    4%
  • Australasia
    3%
  • Asia Developed
    2%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly North American, with 62.02% allocation, followed by Europe Developed at 20.54%. Japan and Asia Emerging also have notable allocations. This geographic diversity provides exposure to different economic environments and growth opportunities. While the North American focus aligns with the client's region, maintaining a global perspective is essential for capturing international growth. Regularly reviewing geographic allocations can ensure the portfolio remains well-positioned for potential shifts in global markets.

Redundant positions Info

  • Schwab U.S. Dividend Equity ETF
    iShares Core Dividend Growth ETF
    High correlation

The portfolio contains some highly correlated assets, particularly between Schwab U.S. Dividend Equity ETF and iShares Core Dividend Growth ETF. High correlations can reduce diversification benefits, potentially increasing risk. It's important to identify and manage these overlaps to ensure the portfolio remains balanced and diversified. By reducing exposure to correlated assets, the portfolio can better withstand market fluctuations and improve its risk-adjusted returns. Regular correlation analysis is crucial to maintaining an optimal investment strategy.

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.

Before diving into portfolio optimization, it's crucial to address the issue of overlapping assets, which could diminish diversification benefits. By reducing exposure to highly correlated ETFs, the portfolio can achieve a more efficient risk-return balance. Moving along the efficient frontier can help tailor the portfolio to be either riskier or more conservative, depending on personal preferences. Once these adjustments are made, focusing on strategic rebalancing can further enhance performance and align with evolving financial goals.

Dividends Info

  • iShares Core Dividend Growth ETF 2.10%
  • iShares International Dividend Growth ETF 2.50%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Schwab International Dividend Equity ETF 6.00%
  • The Real Estate Select Sector SPDR Fund 3.10%
  • Weighted yield (per year) 3.08%

With an overall dividend yield of 3.08%, the portfolio provides a steady income stream. The Schwab International Dividend Equity ETF offers the highest yield at 6%, contributing significantly to the portfolio's income potential. This focus on dividend-paying assets can enhance total returns and provide a cushion during market volatility. To maximize income, consider reinvesting dividends or adjusting allocations towards higher-yielding assets, while ensuring that the overall risk profile aligns with long-term financial goals.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • iShares International Dividend Growth ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab International Dividend Equity ETF 0.14%
  • The Real Estate Select Sector SPDR Fund 0.09%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio is low at 0.11%, reflecting efficient cost management. The individual ETFs have expense ratios ranging from 0.06% to 0.15%, which is quite competitive in the market. Keeping investment costs low is crucial for maximizing net returns over time. Regularly reviewing and comparing expense ratios can help ensure that the portfolio remains cost-effective. By minimizing fees, more of the portfolio's returns can be retained, contributing to long-term growth and wealth accumulation.

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