A highly conservative portfolio with strong treasury focus and minimal equity exposure

Report created on Jan 17, 2025

Risk profile Info

1/7
Secure
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the Schwab Short-Term U.S. Treasury ETF, making up 90% of the total allocation. This structure is typical for conservative portfolios seeking stability and low risk. The remaining 10% is split equally between two Vanguard ETFs, providing minimal equity exposure. Compared to a balanced portfolio, this composition is highly conservative with limited diversification. While it ensures capital preservation, it may not fully capitalize on growth opportunities. Consider gradually increasing equity exposure to enhance growth potential while maintaining a low-risk profile.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 2.92%, with a maximum drawdown of -8.46%. This indicates moderate stability but limited growth. The portfolio's performance aligns with its conservative nature, focusing on preserving capital rather than generating high returns. While the drawdown is manageable, the growth rate may not meet long-term financial goals. To improve returns, consider reallocating a small percentage of assets towards higher-yielding investments within your risk tolerance.

Projection Info

The Monte Carlo simulation, a tool that uses historical data to project future outcomes, suggests a wide range of potential returns. The median projection indicates a 158.15% return, with a 67th percentile reaching 229.41%. The majority of simulations (947 out of 1,000) forecast positive returns, reflecting the portfolio's low-risk nature. However, relying solely on historical data can be limiting, as it does not guarantee future performance. Consider incorporating forward-looking data and adjusting allocations to balance risk and potential returns more effectively.

Asset classes Info

  • Bonds
    90%
  • Stocks
    10%

The portfolio's asset allocation is predominantly in bonds (nearly 90%), with a small portion in stocks (approximately 10%). This heavy bond concentration provides stability but limits growth potential. Compared to a typical balanced portfolio, this allocation is highly conservative, focusing on capital preservation. While this suits risk-averse investors, consider diversifying further by increasing equity exposure to enhance long-term growth prospects without significantly increasing risk.

Sectors Info

  • Technology
    2%
  • Financials
    2%
  • Industrials
    1%
  • Consumer Discretionary
    1%
  • Health Care
    1%
  • Telecommunications
    1%
  • Consumer Staples
    1%

Sector exposure is minimal, with technology, financial services, and industrials making up the largest shares, each under 3%. This limited sector diversification aligns with the portfolio's conservative nature but may not capture sector-specific growth opportunities. During economic shifts, this lack of diversification could impact returns. Consider gradually increasing exposure to diverse sectors to balance potential risks and rewards, enhancing overall portfolio resilience against market fluctuations.

Regions Info

  • North America
    5%
  • Europe Developed
    2%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

The portfolio's geographic exposure is primarily in North America, with minimal holdings in other regions. This narrow focus limits global diversification, potentially increasing vulnerability to regional economic downturns. While a North American focus aligns with the client's region, consider expanding international exposure to capture growth in emerging markets and reduce geographic risk. A more balanced geographic allocation can enhance potential returns and provide a buffer against region-specific volatility.

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's current allocation is efficient for minimizing risk, it may not fully optimize the risk-return balance. The Efficient Frontier, a concept that identifies the best possible risk-return ratio, suggests potential for improvement. By adjusting the asset mix, you can enhance returns without significantly increasing risk. Consider reallocating a small portion of assets towards equities to achieve a more balanced and optimized portfolio, aligning with your financial goals.

Dividends Info

  • Schwab Short-Term U.S. Treasury ETF 4.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 4.64%

The portfolio's dividend yield is 4.64%, largely driven by the Schwab Short-Term U.S. Treasury ETF. This yield provides a steady income stream, aligning with the portfolio's low-risk focus. Dividend income can be a valuable component of total returns, especially in volatile markets. While the yield supports stability, consider exploring higher-yielding assets to boost income potential, ensuring they align with your risk tolerance and investment goals.

Ongoing product costs Info

  • Schwab Short-Term U.S. Treasury ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.03%

The portfolio's total expense ratio (TER) is impressively low at 0.03%, minimizing costs and supporting better long-term returns. Low fees are crucial for maximizing net returns, particularly in conservative portfolios where growth is limited. This cost efficiency is a significant advantage, ensuring more of your investment's returns are retained. Continue monitoring fees and consider cost-effective alternatives if reallocating assets, maintaining a focus on minimizing expenses.

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