Cautious Portfolio with Broad Diversification and High Dividend Yield Balancing Income and Growth

Report created on Dec 3, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed of three ETFs, with a strong emphasis on income and growth. The NEOS S&P 500 High Income ETF constitutes 50%, providing significant exposure to high-dividend US stocks. The iShares Gold Trust represents 25%, offering a hedge against inflation and economic uncertainty. Lastly, the iShares Global Clean Energy ETF accounts for 25%, focusing on sustainable energy investments. This composition reflects a cautious approach, balancing income and growth while maintaining broad diversification across asset classes and sectors.

Growth Info

Historically, the portfolio has delivered a CAGR of 7.28%, which is a respectable return for a cautious investor. The maximum drawdown of -12.33% indicates moderate risk, suggesting the portfolio has weathered market downturns reasonably well. The concentration of returns within just 8 days highlights the importance of staying invested to capture these gains. This performance reflects a balanced approach, providing both income and capital appreciation over time, suitable for investors seeking steady, long-term growth.

Projection Info

The Monte Carlo simulation, using 1,000 hypothetical scenarios, projects a wide range of potential outcomes for the portfolio. The median (50th percentile) projection shows a 42.65% gain, indicating a positive outlook. However, the 5th percentile suggests a possible -50.7% loss, highlighting the inherent uncertainty in investing. With 716 simulations showing positive returns, the overall annualized return across simulations is 4.55%. This analysis underscores the portfolio's potential for growth while acknowledging the risks associated with market volatility.

Asset classes Info

  • Stocks
    74%
  • Other
    25%
  • Cash
    1%

The portfolio is primarily invested in stocks, with a 73.85% allocation, complemented by a 25% allocation to other assets, primarily gold. Cash holdings are minimal at 1.15%, indicating a focus on investment rather than liquidity. This mix aligns with a cautious investment strategy, providing exposure to equities for growth while using gold as a stabilizing asset. The balance between asset classes suggests a well-considered approach to managing risk and return, suitable for an investor seeking moderate growth with some protection against market fluctuations.

Sectors Info

  • Technology
    22%
  • Utilities
    17%
  • Industrials
    7%
  • Financials
    7%
  • Health Care
    5%
  • Consumer Discretionary
    5%
  • Telecommunications
    5%
  • Consumer Staples
    3%
  • Energy
    2%
  • Basic Materials
    1%
  • Real Estate
    1%

Sector allocation is diverse, with significant exposure to technology (21.84%) and utilities (17.18%), followed by industrials and financial services. This sector spread provides a good balance between growth and defensive industries, aligning with a cautious investment strategy. The emphasis on technology and utilities suggests a focus on sectors with potential for steady growth and income. While the allocation is broad, there is room to consider adjusting sector weights to further align with long-term goals and market conditions, ensuring continued diversification.

Regions Info

  • North America
    57%
  • Europe Developed
    8%
  • Asia Emerging
    5%
  • Latin America
    3%
  • Japan
    1%

Geographically, the portfolio is heavily weighted towards North America, with 56.54% of assets, followed by modest allocations in Europe and Asia. This geographic distribution reflects a home bias, common among US investors, providing familiarity and stability. While exposure to emerging markets is limited, it offers some diversification benefits. This allocation aligns with a cautious approach, focusing on regions with established markets. However, there may be opportunities to enhance diversification by gradually increasing exposure to other regions, balancing risk 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.

The portfolio optimization analysis suggests potential for higher returns with the same risk level. By moving along the efficient frontier, investors can achieve a more efficient portfolio. This involves reallocating assets to optimize returns without increasing risk. While the current portfolio is well-diversified, exploring optimization strategies could enhance performance. However, it's essential to first ensure alignment with personal risk tolerance and financial goals. Once these aspects are addressed, pursuing a more efficient allocation could lead to improved long-term outcomes.

Dividends Info

  • iShares Global Clean Energy ETF 1.80%
  • SHP ETF Trust - NEOS S&P 500 High Income ETF 11.60%
  • Weighted yield (per year) 6.25%

The portfolio boasts a high total dividend yield of 6.25%, driven by the NEOS S&P 500 High Income ETF's impressive 11.6% yield. This high yield provides a steady income stream, appealing to income-focused investors. The iShares Global Clean Energy ETF contributes a modest 1.8% yield, adding to the overall income. This dividend focus aligns well with a cautious investment strategy, offering regular income while maintaining potential for capital appreciation. To maximize benefits, reinvesting dividends could further enhance long-term growth and compounding effects.

Ongoing product costs Info

  • iShares Gold Trust 0.25%
  • iShares Global Clean Energy ETF 0.41%
  • SHP ETF Trust - NEOS S&P 500 High Income ETF 0.68%
  • Weighted costs total (per year) 0.50%

Portfolio costs are moderate, with an average total expense ratio (TER) of 0.5%. The NEOS S&P 500 High Income ETF has the highest cost at 0.68%, while the iShares Gold Trust is the most cost-effective at 0.25%. These costs are reasonable given the diversification and income potential offered by the ETFs. Keeping costs low is crucial for maximizing net returns, especially in a cautious portfolio. Regularly reviewing and comparing expense ratios can ensure that costs remain competitive, preserving more of the portfolio's returns for the investor.

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