A cautious portfolio with strong diversification and moderate risk focus

Report created on Jan 8, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of a mix of funds and ETFs, with a notable emphasis on bonds and equities. Bonds make up around 36% of the portfolio, which is typical for a cautious investor. The remaining 60% is in equities, providing a balanced approach to growth and income. This composition aligns well with a moderate risk tolerance, ensuring potential for returns while managing volatility. A well-diversified portfolio structure helps mitigate specific risks associated with individual asset classes. Consider reviewing the balance periodically to ensure it aligns with changing financial goals.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 9.96%, which is a solid performance for a cautious approach. The maximum drawdown of -25.39% indicates the portfolio's resilience during downturns, though it still experienced significant dips. Compared to typical benchmarks, this performance suggests a good balance of risk and reward. Understanding these trends helps set realistic expectations for future performance. Regularly reviewing performance against personal benchmarks can ensure the portfolio continues to meet financial objectives.

Projection Info

The forward projection, based on 1,000 Monte Carlo simulations, shows a median return of 192.21%. This simulation uses historical data to estimate potential outcomes, though it's important to note that past performance isn't predictive of future results. The high number of simulations with positive returns (935) suggests a strong probability of achieving gains. This analysis can guide decision-making by highlighting potential risks and rewards. However, it's crucial to remain flexible in response to changing market conditions and adjust the portfolio as needed.

Asset classes Info

  • Stocks
    61%
  • Bonds
    36%
  • Cash
    1%
  • Real Estate
    1%
  • No data
    1%

The portfolio's asset allocation includes 60.85% stocks and 36.06% bonds, with minor allocations to cash and real estate. This distribution provides a good mix of growth potential and income generation. Diversification across asset classes reduces overall risk, as different assets often respond differently to market changes. This allocation is well-balanced for a cautious investor, though periodic reviews can ensure it remains aligned with personal risk tolerance and financial goals. Adjustments may be necessary if market conditions or personal circumstances change.

Sectors Info

  • Technology
    16%
  • Financials
    9%
  • Consumer Discretionary
    7%
  • Industrials
    7%
  • Health Care
    7%
  • Utilities
    6%
  • Telecommunications
    5%
  • Basic Materials
    4%
  • Consumer Staples
    3%
  • Energy
    3%
  • Real Estate
    2%

Sector allocation is diverse, with a significant emphasis on technology (16.22%), followed by financial services and consumer cyclicals. This sectoral balance supports diversification, though the tech-heavy allocation may introduce volatility, particularly during economic shifts or interest rate changes. Comparing sector weights to common benchmarks can provide insight into potential over- or under-exposures. Rebalancing sectors periodically ensures alignment with market trends and personal investment goals, helping to manage risk and capture growth opportunities.

Regions Info

  • North America
    47%
  • No data
    25%
  • Europe Developed
    11%
  • Japan
    4%
  • Asia Developed
    2%
  • Asia Emerging
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America (47.08%), with notable exposures to Europe and Japan. This distribution provides a mix of developed market stability and growth potential. However, the high allocation to North America may limit benefits from global diversification. Comparing geographic exposures to global benchmarks can highlight potential areas for improvement. Consider increasing exposure to underrepresented regions to enhance diversification and capture growth opportunities in emerging markets.

Redundant positions Info

  • iShares Core MSCI EAFE ETF
    Vanguard FTSE Developed Markets Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among international equity ETFs. High correlation means these assets tend to move together, which can limit diversification benefits. During market downturns, correlated assets may not provide the desired risk mitigation. Identifying and reducing overlap in the portfolio can enhance diversification and improve risk management. Consider replacing some correlated assets with those that have lower correlations to achieve a more balanced risk-return profile.

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's current allocation suggests potential for optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. However, before optimizing, focus on removing highly correlated assets that offer limited diversification benefits. The Efficient Frontier can guide adjustments within the current asset set, but it's important to remember that efficiency refers to optimizing risk and return, not necessarily diversification. Periodic reviews and adjustments can ensure the portfolio remains aligned with evolving financial goals.

Dividends Info

  • CALIFORNIA INTERMEDIATE-TERM TAX-FREE BOND FUND I CLASS 2.60%
  • iShares Municipal Bond Index Fund Investor A Shares 2.30%
  • iShares California Muni Bond ETF 2.80%
  • Pacer US Cash Cows 100 ETF 1.40%
  • Hartford Total Return Bond ETF 3.60%
  • iShares Core MSCI EAFE ETF 1.80%
  • iShares Core MSCI Emerging Markets ETF 1.00%
  • iShares U.S. Infrastructure ETF 1.30%
  • iShares Core 1-5 Year USD Bond 3.20%
  • iShares Global Materials ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • iShares Russell 2500 ETF 0.90%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • The Real Estate Select Sector SPDR Fund 3.50%
  • Weighted yield (per year) 1.72%

The portfolio's total dividend yield of 1.72% contributes to its income generation, with notable yields from bond funds and certain ETFs. Dividends provide a steady income stream, which can be particularly beneficial in volatile markets. For a cautious investor, focusing on dividend-paying assets can enhance portfolio stability and income. Reviewing dividend yields regularly ensures the portfolio continues to meet income needs, particularly as interest rates and market conditions change.

Ongoing product costs Info

  • CALIFORNIA INTERMEDIATE-TERM TAX-FREE BOND FUND I CLASS 0.27%
  • iShares Municipal Bond Index Fund Investor A Shares 0.50%
  • iShares California Muni Bond ETF 0.08%
  • Pacer US Cash Cows 100 ETF 0.49%
  • Hartford Total Return Bond ETF 0.29%
  • iShares Core MSCI EAFE ETF 0.07%
  • iShares Core MSCI Emerging Markets ETF 0.09%
  • iShares U.S. Infrastructure ETF 0.30%
  • iShares Core 1-5 Year USD Bond 0.06%
  • iShares Global Materials ETF 0.41%
  • IQ Hedge Multi-Strategy Tracker ETF 0.78%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • iShares Russell 2500 ETF 0.15%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • The Real Estate Select Sector SPDR Fund 0.09%
  • Weighted costs total (per year) 0.19%

With a total expense ratio (TER) of 0.19%, the portfolio is cost-efficient, supporting better long-term returns. Lower costs mean more of the portfolio's gains are retained, enhancing compounding over time. Regularly reviewing and minimizing costs can significantly impact overall performance. Consider evaluating whether lower-cost alternatives could replace higher-fee assets without sacrificing diversification or performance. Keeping costs in check is a key strategy for maximizing net returns.

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