A balanced portfolio with strong US focus and moderate international diversification

Report created on Jan 2, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists of two main index funds: the Schwab Total Stock Market Index Fund Select Shares at 80% and the Schwab International Index Fund Select Shares at 20%. This composition leans heavily towards US equities, with a smaller portion allocated internationally. Such a structure aligns with a balanced investment strategy, which aims to capture broad market growth while maintaining some global exposure. To enhance diversification, consider adding more asset classes like bonds or real estate, which can provide stability during market downturns.

Growth Info

Historically, the portfolio has shown a strong CAGR of 12.09%, indicating robust growth over time. However, it experienced a maximum drawdown of -34.59%, reflecting significant volatility during downturns. This performance is indicative of a stock-heavy portfolio, which typically offers higher returns at the expense of increased risk. Comparing this to a benchmark, the returns are commendable, but investors should be prepared for potential fluctuations. Regularly reviewing performance against personal risk tolerance can help in making informed adjustments.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected with 1,000 iterations. The median outcome suggests a potential growth of 242.51%, while the 5th percentile warns of an 8.58% return, and the 67th percentile indicates a 349.09% gain. These projections, based on historical data, provide a range of possible outcomes but are not guarantees. They highlight the inherent uncertainties in investing, emphasizing the need for a diversified approach to mitigate risks and capture potential upsides.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks at 99.55%, with negligible allocations in cash, bonds, and other assets. This concentration in equities suggests a focus on growth, which may lead to higher volatility. A more balanced allocation across asset classes can enhance diversification and reduce risk. Consider integrating bonds or other fixed-income securities to provide a buffer during market downturns, aligning with the balanced risk profile.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation shows a significant tilt towards technology at 26.77%, followed by financial services and healthcare. While tech has driven recent market gains, it can also introduce volatility, especially during interest rate hikes. A diversified sector allocation can help mitigate sector-specific risks. Reassessing sector weights and considering exposure to underrepresented areas, such as utilities or real estate, could enhance stability and align with broader market trends.

Regions Info

  • North America
    80%
  • Europe Developed
    13%
  • Japan
    5%
  • Australasia
    2%
  • Asia Developed
    1%

The portfolio's geographic allocation is predominantly in North America at 79.56%, with limited exposure to other regions. This concentration may limit international diversification benefits, which can provide a hedge against regional economic downturns. Increasing exposure to emerging markets or underrepresented developed regions could enhance global diversification and capture growth opportunities. Aligning geographic exposure with global benchmarks can improve risk management.

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 current allocation may not fully utilize the Efficient Frontier, which identifies the best risk-return ratio. Optimizing within the existing asset classes could enhance returns without increasing risk. This involves adjusting the weightings to achieve a more efficient balance. While efficiency focuses on risk and return, it doesn't address diversification, so maintaining a broad asset mix is crucial.

Ongoing product costs Info

  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 0.06%
  • SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term growth. Lower costs mean more of your returns stay invested, compounding over time. This cost efficiency is a strength and aligns with best practices for maximizing net returns. Regularly reviewing and comparing fund fees can ensure the portfolio remains cost-effective, supporting better performance.

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