A balanced portfolio with strong diversification but significant sector and geographic biases

Report created on Jan 20, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of a mix of funds and ETFs, with a notable emphasis on equity investments, making up 100% of the holdings. The largest allocation is to the Fidelity Zero Total Market Index Fund at 30%, followed by the Fidelity Zero International Index Fund at 20%. This composition indicates a preference for broad market exposure with a tilt towards value-oriented small-cap funds. Compared to a typical benchmark, this portfolio is heavily weighted in equities, which can lead to higher volatility but also the potential for significant growth. To align closer with a balanced risk profile, consider adding fixed income or alternative asset classes.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 8.96%, which is competitive for a balanced portfolio. However, it experienced a maximum drawdown of -23.84%, highlighting its vulnerability during market downturns. This performance suggests that while the portfolio has achieved solid returns, it is subject to significant fluctuations. Comparing this to a benchmark with similar risk, the drawdown indicates room for improvement in risk management. Consider strategies to mitigate drawdowns, such as diversifying into less correlated assets or increasing cash reserves.

Projection Info

Forward projections using Monte Carlo simulations suggest an annualized return of 10.21%, with a wide range of potential outcomes. The simulations, which use historical data to predict future performance, show a 5th percentile return of 10.2% and a 67th percentile return of 340.9%. While these projections provide a sense of potential growth, it's crucial to remember that they are based on past market conditions and may not account for future changes. To improve the probability of achieving higher returns, consider refining asset allocation and reducing exposure to highly correlated assets.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in stocks, which provides exposure to growth but lacks the stability typically offered by bonds or other asset classes. This allocation can lead to higher volatility, especially in market downturns. Compared to a diversified benchmark, this portfolio may benefit from incorporating bonds or alternative investments to balance risk and return. Diversifying into different asset classes can help smooth returns over time and provide a buffer against equity market volatility.

Sectors Info

  • Technology
    19%
  • Financials
    18%
  • Industrials
    14%
  • Health Care
    7%
  • Energy
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Consumer Discretionary
    5%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation shows a concentration in technology (19%) and financial services (18%), which may expose the portfolio to sector-specific risks. This concentration can lead to increased volatility, especially if these sectors face downturns. Compared to common benchmarks, this allocation is tech-heavy, which might be advantageous during tech booms but risky during interest rate hikes. To mitigate sector risk, consider rebalancing towards underrepresented sectors like healthcare or consumer staples, which can provide stability during economic uncertainty.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Japan
    7%
  • Asia Emerging
    3%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio has a significant geographic bias, with 72% exposure to North America. While this aligns with many benchmarks, it limits diversification benefits from international markets. This heavy regional focus could pose a risk if the U.S. market underperforms. To enhance diversification, consider increasing exposure to emerging markets or other underrepresented regions, which can offer growth opportunities and reduce dependency on North American performance.

Market capitalization Info

  • Mega-cap
    29%
  • Large-cap
    23%
  • Mid-cap
    21%
  • Small-cap
    18%
  • Micro-cap
    8%

Market capitalization distribution is relatively balanced, with 29% in mega caps and 8% in micro caps. This spread provides exposure to both established companies and growth-oriented smaller firms. However, the portfolio leans slightly towards smaller caps, which can be more volatile but offer higher growth potential. Compared to benchmarks, the allocation to small and micro caps is higher, suggesting a tilt towards value investing. To manage risk, consider adjusting the balance to align more closely with market norms.

Redundant positions Info

  • Avantis® U.S. Small Cap Value ETF
    VANGUARD SMALL-CAP VALUE INDEX FUND ADMIRAL SHARES
    High correlation
  • BlckRck Fds III Blk Rk Rssl 1000 Inx Fd
    FIDELITY ZERO TOTAL MARKET INDEX FUND
    High correlation

The portfolio contains several highly correlated assets, such as the Avantis U.S. Small Cap Value ETF and Vanguard Small-Cap Value Index Fund. High correlation among assets can limit diversification benefits, as they tend to move in the same direction during market shifts. This can increase portfolio volatility and reduce risk-adjusted returns. To enhance diversification, consider replacing highly correlated assets with those that have lower correlations, potentially improving the portfolio's resilience to market changes.

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 configuration could be optimized for a better risk-return balance using the Efficient Frontier. This method suggests an expected return of 13.45% at a similar risk level, indicating potential for improvement. The Efficient Frontier helps identify the best possible risk-return ratio by adjusting asset allocations within the existing portfolio. While optimizing, focus on reducing exposure to highly correlated assets and consider diversifying into other asset classes to achieve a more efficient portfolio.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 1.10%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • BlckRck Fds III Blk Rk Rssl 1000 Inx Fd 0.80%
  • Fidelity® High Dividend ETF 2.90%
  • FIDELITY ZERO TOTAL MARKET INDEX FUND 1.10%
  • VANGUARD SMALL-CAP VALUE INDEX FUND ADMIRAL SHARES 1.90%
  • Weighted yield (per year) 1.38%

The portfolio's overall dividend yield is 1.38%, with notable contributions from the Avantis International Small Cap Value ETF at 4.30% and the Fidelity High Dividend ETF at 2.90%. Dividends can provide a steady income stream and contribute to total returns, particularly in volatile markets. Compared to benchmarks, this yield is modest, suggesting room for enhancing income generation. To boost dividend income, consider reallocating to higher-yielding assets or funds focused on dividend growth.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • BlckRck Fds III Blk Rk Rssl 1000 Inx Fd 0.07%
  • Fidelity® High Dividend ETF 0.15%
  • VANGUARD SMALL-CAP VALUE INDEX FUND ADMIRAL SHARES 0.07%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is impressively low at 0.10%, which is beneficial for long-term performance. Lower costs mean more of your investment returns are retained, enhancing compounding effects over time. Compared to industry averages, this TER is highly competitive, indicating efficient cost management. To maintain this advantage, regularly review and compare fund fees to ensure they remain competitive, and consider switching to lower-cost alternatives if available.

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