A balanced portfolio with low diversification and high dividend focus in US equities

Report created on Jan 2, 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 is heavily weighted towards equities, with 99.6% of assets in stocks and a mere 0.4% in cash. This aligns with a typical balanced portfolio, which often favors stocks for growth. However, the low diversification score suggests a concentration risk. A more diversified mix, including bonds or alternative assets, could provide better risk management. Balancing stock-heavy allocations with other asset classes can reduce volatility and protect against market downturns.

Growth Info

The portfolio has delivered a strong historical performance, with a Compound Annual Growth Rate (CAGR) of 12.58%. This rate outpaces typical market benchmarks, indicating robust growth. However, the maximum drawdown of -35.31% highlights potential risk during market declines. While past performance is a useful gauge, it does not guarantee future results. Regularly reviewing performance against benchmarks can identify areas for improvement or adjustment.

Projection Info

Monte Carlo simulations, which use historical data to model future outcomes, suggest a wide range of potential returns. With a median projection of 344.04% growth, the portfolio shows strong potential. However, the 5th percentile result of 51.75% indicates possible downside risk. While simulations provide insights, they are not foolproof. Regularly updating projections with current data can help manage expectations and guide strategic adjustments.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely allocated to stocks, lacking exposure to other asset classes like bonds or real estate. This can limit diversification benefits, as different asset classes often respond differently to market conditions. A diversified portfolio typically includes a mix of stocks, bonds, and alternative investments to balance risk and reward. Considering a broader range of asset classes could enhance stability and reduce volatility.

Sectors Info

  • Technology
    22%
  • Financials
    13%
  • Health Care
    13%
  • Consumer Discretionary
    9%
  • Consumer Staples
    9%
  • Industrials
    8%
  • Telecommunications
    8%
  • Energy
    7%
  • Utilities
    5%
  • Real Estate
    4%
  • Basic Materials
    2%

Sector allocation is fairly balanced, with technology leading at 21.88%, followed by financial services and healthcare. This diversification across sectors helps mitigate risks associated with sector-specific downturns. However, the technology concentration could increase volatility during periods of regulatory scrutiny or tech market corrections. Regularly reassessing sector exposure in line with market trends and economic conditions can optimize sector balance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is heavily concentrated in North American equities, with 99.23% exposure. This geographic concentration limits global diversification, potentially missing growth opportunities in other regions. While US markets are robust, international exposure can provide additional growth prospects and hedge against local economic downturns. Exploring investments in developed and emerging markets could enhance geographic diversification and risk management.

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 composition may not lie on the Efficient Frontier, which represents the best possible risk-return ratio. Adjusting allocations between existing assets could optimize this balance. The Efficient Frontier helps identify the most efficient portfolio, maximizing returns for a given level of risk. Periodically revisiting this analysis ensures the portfolio remains aligned with risk-return objectives and adapts to changing market conditions.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Invesco S&P 500® High Dividend Low Volatility ETF 3.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 2.15%

The portfolio's dividend yield of 2.15% provides a steady income stream, appealing for income-focused investors. With high dividend ETFs like Schwab and Invesco, this yield supports income generation. Dividends can cushion against market volatility, offering returns even in stagnant markets. However, focusing on dividend yield should not overshadow growth potential. Balancing income and growth objectives ensures a well-rounded investment strategy.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Invesco S&P 500® High Dividend Low Volatility ETF 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's Total Expense Ratio (TER) of 0.08% is impressively low, supporting better long-term performance by minimizing costs. Low costs are crucial, as they directly impact net returns. This cost efficiency aligns with best practices, allowing more of your investment to compound over time. Continually monitoring expense ratios and seeking cost-effective alternatives can further enhance returns, ensuring the portfolio remains cost-optimized.

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