A cautious portfolio with a focus on dividends and moderate exposure to global equities
Report created on Jan 16, 2025Risk profile
3/7
Diversification profile
3/5
Positions
-
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 35.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 25.00% -
VT Vanguard Total World Stock Index Fund ETF Shares
VT - US9220427424 20.00% -
HY iShares Trust - iShares High Yield Corporate Bond BuyWrite Strategy ETF
HYGW 10.00% -
VN Vanguard Real Estate Index Fund ETF Shares
VNQ - US9229085538 10.00%
The portfolio is moderately diversified, with a significant focus on dividend-paying equities, comprising 35% of the allocation. Bonds represent 25%, providing stability, while global stocks make up 20%. Real estate and high-yield corporate bonds account for 10% each, adding income potential and diversification. Compared to common benchmarks, this portfolio leans towards dividend equities, which can offer income stability. However, it's important to ensure that this allocation aligns with your investment goals and risk tolerance.
Growth
Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 7.21%, with a maximum drawdown of -10.8%. This indicates a stable performance with moderate risk. Compared to common benchmarks, this performance is respectable for a cautious investor. Understanding past performance helps set realistic expectations, but remember that past performance doesn't guarantee future results. Maintaining a balanced approach can help continue this trend.
Projection
Forward projections using Monte Carlo simulations show a range of potential outcomes, with a 50th percentile return of 134.75%. This simulation uses historical data to predict future performance, but it's not foolproof. The range of outcomes highlights the uncertainty inherent in investing. To improve potential returns, consider periodically reviewing and adjusting your asset allocation, ensuring it aligns with changing market conditions and personal goals.
Asset classes
- Stocks 47%
- Bonds 35%
- Real Estate 10%
- Cash 8%
The portfolio's asset allocation includes 47.46% in stocks, 34.68% in bonds, 10% in real estate, and a small cash position of 7.83%. This mix provides a balance between growth and income. Compared to benchmark norms, the allocation is conservative, favoring income-generating assets. This composition is suitable for a cautious investor, though it may limit growth potential. Regularly reviewing this allocation can help maintain alignment with your financial objectives.
Sectors
- Utilities 11%
- Real Estate 10%
- Financials 10%
- Technology 9%
- Health Care 7%
- Industrials 6%
- Consumer Discretionary 6%
- Consumer Staples 6%
- Energy 5%
- Telecommunications 3%
- Basic Materials 1%
Sector allocation is well-distributed, with notable exposures in utilities, real estate, and financial services. This balance reduces sector-specific risks. However, technology and healthcare sectors are underrepresented compared to common benchmarks. These sectors often drive growth, so consider increasing exposure if seeking more aggressive returns. Monitoring sector trends and adjusting allocations accordingly can optimize performance.
Regions
- North America 68%
- Europe Developed 3%
- Asia Emerging 1%
- Japan 1%
- Asia Developed 1%
Geographically, the portfolio is heavily weighted towards North America at 67.92%, with limited exposure to other regions. This concentration may reduce diversification benefits and increase vulnerability to regional economic shifts. Comparing to benchmark allocations, consider diversifying into other regions to balance potential risks and opportunities. Expanding geographic exposure can enhance 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.
The portfolio can be optimized using the Efficient Frontier, potentially increasing expected returns to 8.83% without increasing risk. This optimization focuses on achieving the best possible risk-return ratio with current assets. While this may not align with all investment goals, periodically evaluating the portfolio's efficiency can help ensure it remains balanced and aligned with risk tolerance and return objectives.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.70%
- iShares Trust - iShares High Yield Corporate Bond BuyWrite Strategy ETF 10.30%
- Schwab U.S. Dividend Equity ETF 3.60%
- Vanguard Real Estate Index Fund ETF Shares 3.90%
- Vanguard Total World Stock Index Fund ETF Shares 1.90%
- Weighted yield (per year) 3.98%
With a total dividend yield of 3.98%, the portfolio offers a solid income stream, aligning with its cautious profile. Dividends contribute to overall returns and can provide stability during volatile markets. For income-focused investors, maintaining or increasing dividend exposure can be beneficial. Regularly reviewing dividend yields and potential changes in distribution policies is advisable to sustain income levels.
Ongoing product costs
- Vanguard Total Bond Market Index Fund ETF Shares 0.03%
- iShares Trust - iShares High Yield Corporate Bond BuyWrite Strategy ETF 0.69%
- Schwab U.S. Dividend Equity ETF 0.06%
- Vanguard Real Estate Index Fund ETF Shares 0.12%
- Vanguard Total World Stock Index Fund ETF Shares 0.07%
- Weighted costs total (per year) 0.12%
The portfolio's total expense ratio (TER) is impressively low at 0.12%, supporting better long-term returns. Lower costs mean more of your investment returns stay with you. Comparing with industry averages, this cost structure is favorable. Continuously monitoring costs and seeking opportunities to reduce them further can enhance net returns, especially over longer investment horizons.
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