A balanced portfolio with strong U.S. focus and high dividend yield

Report created on Jan 20, 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 U.S. equities, with 98% invested in stocks and a notable concentration in large-cap ETFs, particularly the Vanguard S&P 500 ETF at 50%. This composition suggests a focus on stability and growth, typical of large-cap investments. Compared to a diversified benchmark, this portfolio has lower diversification, primarily due to its concentrated asset class and geographic focus. To enhance diversification, consider adding international or alternative asset classes.

Growth Info

Historically, this portfolio has shown impressive performance with a Compound Annual Growth Rate (CAGR) of 20.66%. This suggests strong growth potential, though it experienced a maximum drawdown of -12.62%, indicating some volatility. Compared to typical benchmarks, these figures are quite favorable, reflecting a well-performing selection of ETFs. However, it's important to remember that past performance doesn't guarantee future results. Maintaining a balance between risk and reward is crucial for sustained growth.

Projection Info

Forward projections using Monte Carlo simulations indicate a robust potential for future returns, with an annualized return of 22.18% across simulations. These projections, while insightful, are based on historical data and statistical models, which have limitations in predicting future market conditions. The portfolio's positive outlook across simulations is encouraging, yet it's wise to remain adaptable to changing market dynamics and regularly review asset allocations.

Asset classes Info

  • Stocks
    98%
  • No data
    2%

The allocation is predominantly in stocks, with 98% exposure, which aligns with a typical growth-focused strategy. This high concentration in equities offers potential for significant returns but also increases exposure to market volatility. Compared to a diversified benchmark, the lack of fixed income or alternative assets may reduce stability. To mitigate risk, consider incorporating a mix of asset classes to balance the portfolio, such as bonds or real estate.

Sectors Info

  • Technology
    35%
  • Consumer Discretionary
    12%
  • Financials
    12%
  • Telecommunications
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is heavily tilted towards technology at 35%, followed by consumer cyclicals and financial services. This tech-heavy focus can drive growth, especially in bull markets, but may lead to higher volatility during downturns or interest rate hikes. Compared to broader benchmarks, the sector balance is skewed, suggesting potential vulnerability to sector-specific risks. Diversifying across more sectors could help stabilize returns and reduce reliance on any single industry.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99% exposure. This focus can capitalize on the stability and growth of U.S. markets but also increases vulnerability to regional economic downturns. Compared to global benchmarks, the lack of international diversification is notable. To enhance geographic diversification, consider introducing exposure to developed and emerging markets outside North America, reducing regional risk.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    28%
  • Mid-cap
    13%
  • Small-cap
    6%
  • Micro-cap
    5%

The portfolio's market capitalization distribution is dominated by mega and large-cap stocks, comprising 74% of the total. This focus on larger companies can provide stability and lower volatility compared to small-cap investments. However, it may limit growth potential found in smaller, more dynamic companies. Balancing the market cap exposure by increasing small and mid-cap holdings could enhance diversification and capture growth opportunities.

Redundant positions Info

  • JPMorgan Nasdaq Equity Premium Income ETF
    Vanguard S&P 500 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets, particularly among the Vanguard S&P 500 ETF, Schwab U.S. Large-Cap Growth ETF, and JPMorgan Nasdaq Equity Premium Income ETF. High correlation means these assets often move in tandem, reducing diversification benefits. During market downturns, this can lead to compounded losses. To enhance risk management, consider replacing or reducing exposure to overlapping assets, thereby improving the portfolio's overall resilience.

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.

While the portfolio can be optimized using the Efficient Frontier to achieve a better risk-return ratio, addressing asset overlap should be the first step. The Efficient Frontier suggests the best possible risk-return balance based on current assets, but it doesn't account for diversification or sectoral balance. By reducing correlated assets and considering diversification improvements, the portfolio can achieve a more optimal and resilient position.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • JPMorgan Nasdaq Equity Premium Income ETF 9.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SHP ETF Trust - NEOS S&P 500 High Income ETF 11.80%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 2.97%

The portfolio boasts a solid dividend yield of 2.97%, with the SHP ETF Trust - NEOS S&P 500 High Income ETF contributing significantly at 11.80%. High dividends provide a steady income stream, which can be appealing for income-focused investors. However, relying heavily on high-yield assets can sometimes lead to increased risk. Balancing dividend yield with growth potential ensures the portfolio remains aligned with long-term wealth-building goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SHP ETF Trust - NEOS S&P 500 High Income ETF 0.68%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, which is impressively low, particularly due to the cost-effective Vanguard and Schwab ETFs. Low costs enhance long-term returns by minimizing the drag on performance. This cost efficiency is a positive aspect, aligning well with best practices for cost management. Continuing to monitor and select low-cost options will support the portfolio's growth potential and financial health over time.

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