A balanced portfolio with a focus on US equities and low geographic diversification

Report created on Feb 19, 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 comprises three ETFs: Vanguard Total Stock Market, Invesco NASDAQ 100, and Schwab U.S. Dividend Equity, each holding roughly one-third of the portfolio. This structure leans heavily on U.S. equities, reflecting a concentrated approach. While the allocation provides exposure to a broad range of U.S. companies, it lacks diversification beyond the domestic market. A more diversified asset mix, including international equities or bonds, could enhance risk management by spreading exposure across various economic environments. Balancing these ETFs with other asset types may help align the portfolio with a balanced risk profile.

Growth Info

Historically, the portfolio has delivered a strong compound annual growth rate (CAGR) of 14.99%, outperforming many benchmarks. This robust performance indicates effective asset selection, primarily driven by U.S. equities. However, it's essential to remember that past performance doesn't guarantee future results. The portfolio's max drawdown of -24.61% highlights potential volatility, a typical trait of equity-heavy portfolios. To mitigate this risk, consider incorporating more conservative assets to cushion against market downturns while maintaining growth potential.

Projection Info

The Monte Carlo simulation, using historical data to model potential outcomes, suggests a wide range of future returns. The median outcome projects a 586.7% increase, with a high probability of positive returns. However, these projections are not guarantees and should be viewed as one possible scenario among many. While the simulation provides a positive outlook, incorporating a broader mix of asset classes could help manage risk by reducing reliance on past performance trends. This approach could stabilize returns and align with a balanced investment strategy.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, with no allocation to cash or bonds. This single asset class focus reflects a growth-oriented strategy but limits diversification. A balanced portfolio typically includes a mix of stocks, bonds, and other assets to spread risk. By introducing bonds or alternative investments, you can potentially reduce volatility and enhance stability. This diversification can help protect the portfolio from significant losses during market downturns, aligning better with a balanced risk profile.

Sectors Info

  • Technology
    31%
  • Consumer Discretionary
    12%
  • Health Care
    11%
  • Financials
    11%
  • Telecommunications
    10%
  • Consumer Staples
    8%
  • Industrials
    8%
  • Energy
    5%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation is heavily weighted towards technology (31%), followed by consumer cyclicals and healthcare. This concentration may lead to increased volatility, especially during tech sector downturns. While sector exposure can drive growth, a more balanced sector allocation could mitigate risk. Consider diversifying into underrepresented sectors like utilities and real estate, which often provide stability during economic fluctuations. Aligning sector weights with broader market benchmarks could enhance diversification and reduce sector-specific risks.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic exposure is overwhelmingly North American (99%), with minimal international diversification. This focus can lead to over-reliance on the U.S. economy, exposing the portfolio to regional risks. Expanding geographic exposure, particularly in developed and emerging markets, can enhance diversification and capture growth opportunities abroad. A more balanced geographic allocation can help mitigate risks associated with economic or political events in any single region, aligning with a balanced investment approach.

Market capitalization Info

  • Large-cap
    41%
  • Mega-cap
    33%
  • Mid-cap
    20%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio is primarily invested in large-cap stocks, with 41% in big and 33% in mega-cap companies. This focus on large-cap equities typically offers stability and steady growth. However, medium and small-cap stocks, which make up a smaller portion of the portfolio, can provide higher growth potential and diversification. Increasing exposure to smaller companies could enhance long-term returns and reduce reliance on large-cap performance. A balanced allocation across market capitalizations can optimize risk and return.

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's risk-return profile can be optimized using the Efficient Frontier, which suggests the best possible risk-return ratio for a given set of assets. By adjusting allocations among existing ETFs, you can potentially enhance returns for the same level of risk or reduce risk without sacrificing returns. This optimization doesn't necessarily mean adding new assets but rather fine-tuning current holdings. Regularly reassessing the portfolio's position on the Efficient Frontier can help maintain an optimal balance.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.79%

The portfolio's dividend yield is 1.79%, driven by the Schwab U.S. Dividend Equity ETF's 3.60% yield. Dividends provide a steady income stream, beneficial for reinvestment or income generation. While dividends are a valuable component, balancing growth and income is crucial. Assess whether the current yield aligns with your income needs and consider adjusting allocations to enhance income potential without sacrificing growth. This approach can support a balanced investment strategy focused on both income and capital appreciation.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, with individual ETFs ranging from 0.03% to 0.15%. These low costs support better long-term performance by minimizing fees that can erode returns. Maintaining a focus on cost-efficient investments is a sound strategy. Regularly review expense ratios to ensure they remain competitive, and consider reallocating to lower-cost options if available. Keeping costs low is a key factor in optimizing portfolio performance and aligning with a balanced approach.

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