Conservative portfolio with high cash reserves and concentrated S&P 500 exposure

Report created on Dec 30, 2024

Risk profile Info

2/7
Conservative
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily weighted towards cash reserves, comprising over half the allocation, with the remaining invested primarily in S&P 500-related ETFs and funds. While cash offers stability, the limited diversification into other asset classes may restrict growth potential. A more balanced allocation could enhance returns while maintaining risk levels. Consider reallocating some cash into diversified equity, bond, or alternative investments to achieve a more typical balance seen in conservative portfolios, which often include a mix of bonds and equities.

Growth Info

Historically, the portfolio has achieved a CAGR of 7.51%, demonstrating solid growth over time, albeit with a maximum drawdown of 13.77%. This performance is consistent with conservative portfolios that prioritize capital preservation. While past performance is no guarantee of future results, maintaining a diversified strategy could help mitigate drawdowns. Comparing this portfolio's performance to a benchmark like a balanced index fund may reveal opportunities for improvement, particularly in periods of market volatility.

Projection Info

Using Monte Carlo simulations, this portfolio shows a wide range of outcomes, with a median return projection of 136.49%. The analysis, based on historical data, suggests potential for significant growth, but also highlights risks, with a 5th percentile outcome of -70.69%. While these projections offer insights, they are not predictive. Consider reviewing asset allocations to ensure alignment with your risk tolerance and long-term goals, as simulations indicate potential for both high returns and substantial losses.

Asset classes Info

  • Stocks
    44%
  • Bonds
    2%
  • Cash
    1%

The portfolio is primarily composed of cash and equities, with minimal exposure to bonds and other asset classes. This allocation limits diversification benefits that could buffer against market volatility. A more balanced mix, including bonds or real estate, could reduce risk and enhance stability. Conservative portfolios typically include a higher proportion of bonds compared to equities, offering steady income and reduced volatility. Consider increasing bond exposure to align with a traditional conservative strategy.

Sectors Info

  • Technology
    17%
  • Financials
    5%
  • Telecommunications
    4%
  • Health Care
    4%
  • Industrials
    4%
  • Consumer Discretionary
    3%
  • Consumer Staples
    3%
  • Utilities
    1%
  • Consumer Discretionary
    1%
  • Real Estate
    1%
  • Energy
    1%
  • Basic Materials
    1%

Sector allocation is heavily skewed towards technology, which can lead to increased volatility, especially in rising interest rate environments. Other sectors like financial services and healthcare are underrepresented. A diversified sector allocation can reduce risk and enhance portfolio resilience. Consider adjusting sector weights to achieve a more balanced exposure similar to broad market indices, which typically include a wide range of sectors to capture varying economic cycles and trends.

Regions Info

  • North America
    45%
  • No data
    2%
  • Europe Developed
    1%

The portfolio is predominantly invested in North American assets, limiting geographic diversification. This concentration may expose the portfolio to regional economic risks. Diversifying into international markets could enhance returns and reduce risk by capturing growth opportunities in other regions. Consider increasing exposure to emerging markets or developed economies outside North America to align with global benchmarks, which often include a more balanced geographic distribution.

Redundant positions Info

  • iShares Core S&P 500 ETF
    SPDR S&P 500 ETF Trust
    SPDR® Portfolio S&P 500 Growth ETF
    Invesco S&P 500® Quality ETF
    Schwab S&P 500 Index Fund
    High correlation
  • Invesco S&P 500® Equal Weight ETF
    SPDR® S&P MIDCAP 400 ETF Trust
    High correlation

The portfolio contains highly correlated assets, particularly among S&P 500 ETFs. This correlation reduces diversification benefits, as these assets tend to move in tandem. During market downturns, such correlation can exacerbate losses. To improve diversification, consider reducing exposure to overlapping ETFs and adding uncorrelated assets, such as international equities or alternative investments, to enhance risk management and potential returns.

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.

Optimization using the Efficient Frontier suggests potential for improved risk-return balance by adjusting current allocations. This involves reallocating among existing assets to achieve the best possible risk-return ratio. While current allocations offer stability, exploring optimization could enhance returns without significantly increasing risk. This process focuses on achieving efficiency, not necessarily diversification, by maximizing returns for the given level of risk.

Dividends Info

  • Apple Inc 0.40%
  • DFA World ex US Gvrnmnt Fxd Incm Prt Ins 1.60%
  • Fidelity Govt Cash Rsrvs 4.50%
  • iShares Core S&P 500 ETF 0.90%
  • The Coca-Cola Company 3.10%
  • SPDR® S&P MIDCAP 400 ETF Trust 0.80%
  • GROWTH PORTFOLIO CLASS A 0.40%
  • iShares MSCI USA Momentum Factor ETF 0.40%
  • PIMCO INCOME FUND INSTITUTIONAL 5.80%
  • Invesco S&P 500® Equal Weight ETF 1.50%
  • Invesco S&P 500® Quality ETF 0.90%
  • SPDR S&P 500 ETF Trust 0.80%
  • SPDR® Portfolio S&P 500 Growth ETF 0.60%
  • Schwab S&P 500 Index Fund 1.20%
  • Weighted yield (per year) 2.82%

The portfolio's dividend yield is 2.82%, providing a modest income stream. This is beneficial for conservative investors seeking regular income. However, the reliance on cash and S&P 500 ETFs limits yield potential. Exploring higher-yielding bonds or dividend-focused equities could increase income without significantly altering risk. Balancing income-generating assets with growth-oriented ones can optimize returns while maintaining income stability.

Ongoing product costs Info

  • DFA World ex US Gvrnmnt Fxd Incm Prt Ins 0.20%
  • Fidelity Govt Cash Rsrvs 0.26%
  • iShares Core S&P 500 ETF 0.03%
  • SPDR® S&P MIDCAP 400 ETF Trust 0.24%
  • GROWTH PORTFOLIO CLASS A 0.82%
  • iShares MSCI USA Momentum Factor ETF 0.15%
  • PIMCO INCOME FUND INSTITUTIONAL 0.83%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • Invesco S&P 500® Quality ETF 0.15%
  • SPDR S&P 500 ETF Trust 0.10%
  • SPDR® Portfolio S&P 500 Growth ETF 0.04%
  • Schwab S&P 500 Index Fund 0.02%
  • Weighted costs total (per year) 0.20%

The portfolio's total expense ratio (TER) is relatively low at 0.2%, which is favorable for long-term performance. Lower costs mean more of your returns are retained, supporting better growth over time. However, scrutinizing individual fund fees may reveal opportunities to further reduce costs. Consider replacing higher-cost funds with lower-cost alternatives, such as index funds or ETFs, to maintain cost efficiency while achieving desired exposure.

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