Balanced portfolio with strong US focus and moderate risk but high sector concentration

Report created on Jan 9, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards US equities, with 50% in the Schwab Total Stock Market Index Fund and 35% in the Vanguard S&P 500 ETF. The remaining 15% is in the Schwab International Index Fund. This composition is typical for a balanced profile, emphasizing domestic over international exposure. While this structure supports growth, it may lack the diversification benefits seen in portfolios with broader asset class representation, such as bonds or alternative investments. Consider introducing a wider variety of asset classes to better hedge against market volatility and economic cycles.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 12.6%, indicating robust growth. However, it experienced a significant maximum drawdown of -34.33%, reflecting vulnerability during market downturns. Compared to similar portfolios, this performance is commendable, yet the drawdown suggests a need for risk management. To mitigate future downturns, consider strategies like diversifying into less correlated asset classes or employing tactical asset allocation adjustments during volatile periods.

Projection Info

Forward projections using Monte Carlo simulations suggest a median growth of 303.67% over the investment horizon. Monte Carlo simulations use historical data to estimate potential future outcomes, though they cannot guarantee specific results. The portfolio's annualized return across simulations is 12.14%, indicating consistent performance. While these projections are optimistic, remember they rely on past data and assumptions. To enhance future projections, consider incorporating emerging market exposure and alternative asset classes.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for nearly 100% of the allocation, with negligible cash, bond, and other asset holdings. This concentration in equities supports growth but increases exposure to market volatility. Compared to benchmark portfolios, which might include a mix of bonds and alternative assets, this portfolio could benefit from greater diversification. Introducing fixed income or real estate investments could reduce volatility and provide more stable returns over time.

Sectors Info

  • Technology
    29%
  • Financials
    14%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Discretionary
    7%
  • Consumer Staples
    6%
  • Consumer Discretionary
    4%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

The portfolio is heavily concentrated in the technology sector, comprising 28.5% of the total allocation. Other significant sectors include financial services and healthcare. Such concentration can amplify returns in a thriving tech market but also heightens risk during downturns or regulatory changes. Compared to benchmarks, this sector allocation is aggressive. To balance risk, consider diversifying into underrepresented sectors like utilities or real estate, which can provide stability and counter-cyclical performance.

Regions Info

  • North America
    85%
  • Europe Developed
    10%
  • Japan
    3%
  • Australasia
    1%
  • Asia Developed
    1%

The portfolio's geographic allocation is heavily skewed towards North America, representing 84.5% of the total exposure. This focus can be advantageous given the region's economic stability but limits diversification. Compared to global benchmarks, there's an underrepresentation in emerging markets and regions like Asia and Latin America. Expanding geographic exposure could reduce regional risk and capture growth opportunities in developing economies, enhancing overall portfolio resilience.

Redundant positions Info

  • Vanguard S&P 500 ETF
    SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES
    High correlation

The portfolio includes highly correlated assets, notably the Schwab Total Stock Market Index Fund and the Vanguard S&P 500 ETF. High correlation means these assets tend to move in tandem, which can limit diversification benefits, especially during market downturns. To improve diversification, consider reducing overlapping positions and adding assets with lower correlations. This adjustment can help manage risk and improve the portfolio's resilience against synchronized market declines.

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 could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. By adjusting the allocation among existing assets, the portfolio can potentially enhance returns without increasing risk. However, this optimization focuses solely on the current assets and their allocations, not diversification or other goals. Consider using this approach to refine the portfolio's balance between risk and return, ensuring it aligns with your investment objectives.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 0.42%

The portfolio's overall dividend yield is relatively low at 0.42%, with the Vanguard S&P 500 ETF contributing a 1.2% yield. While dividends can provide a steady income stream, this portfolio prioritizes growth over income generation. For investors seeking higher income, consider increasing exposure to dividend-focused funds or sectors like utilities and consumer staples, which typically offer higher yields. Balancing growth and income can enhance portfolio stability and meet varied financial goals.

Ongoing product costs Info

  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 0.06%
  • SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.03%. This cost efficiency is beneficial for long-term performance, as lower fees mean more of your returns are retained. Compared to industry averages, these costs are highly competitive, supporting the portfolio's overall growth potential. Maintaining this low-cost structure is advantageous, but ensure the focus remains on quality and diversification rather than solely on minimizing expenses.

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