A balanced US-focused portfolio with moderate risk and low diversification

Report created on Dec 18, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio consists of four primary holdings: the Schwab Total Stock Market Index Fund, Global X NASDAQ 100 Covered Call ETF, Schwab Fundamental U.S. Small Company Index ETF, and Financial Select Sector SPDR Fund. The largest allocation is to the Schwab Total Stock Market Index Fund at 28.62%, closely followed by the Global X NASDAQ 100 Covered Call ETF at 28.57%. The portfolio is heavily skewed towards equities, with a negligible allocation to cash and bonds. This composition suggests a focus on growth through equity investments, but the lack of diversification across asset classes could expose the portfolio to higher volatility.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 12.38%, indicating strong past performance. However, it has also experienced a maximum drawdown of -35.64%, highlighting the potential for significant losses during market downturns. The portfolio's performance is concentrated, with 90% of returns coming from just 29 days. While past performance can provide insights, it is not always indicative of future results. Investors should be aware of the risk of relying solely on historical data, especially in volatile markets.

Projection Info

The forward projection, based on Monte Carlo simulations, suggests a wide range of potential outcomes. With 1,000 simulations, most scenarios indicate positive returns, with an annualized return of 13.01%. The 5th percentile shows a modest 34.42% return, while the 67th percentile projects a much higher 532.43% return. Monte Carlo simulations use historical data to model potential future outcomes, but they cannot predict market changes or black swan events. Investors should use these projections as a guide rather than a certainty.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, making up 99.86% of the allocation, with minimal exposure to cash and bonds. This heavy reliance on equities can lead to higher returns but also introduces greater risk, particularly during market downturns. Diversifying across different asset classes, such as bonds or real assets, can help mitigate risk and provide more stability. Investors might consider rebalancing to include a broader array of asset classes to enhance the portfolio's resilience.

Sectors Info

  • Financials
    28%
  • Technology
    27%
  • Industrials
    8%
  • Telecommunications
    8%
  • Consumer Discretionary
    7%
  • Health Care
    6%
  • Consumer Staples
    4%
  • Consumer Discretionary
    3%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Energy
    2%
  • Utilities
    2%

Sectoral allocation in the portfolio is concentrated, with significant exposure to financial services (28%) and technology (26.55%). Other sectors like industrials, communication services, and consumer cyclicals have smaller allocations. This concentration can lead to sector-specific risks, especially if these industries face downturns. A more balanced sectoral allocation can reduce risk and improve diversification. Investors should evaluate their sector exposure and consider spreading investments across more industries to mitigate potential sector-specific impacts.

Regions Info

  • North America
    71%
  • Europe Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with 70.63% exposure, and minimal investments in other regions. This concentration can limit the benefits of geographic diversification, such as reduced exposure to region-specific risks and currency fluctuations. Expanding geographic exposure to include more developed and emerging markets can enhance diversification and provide access to growth opportunities outside the US. Investors should assess their geographic allocation and consider increasing international exposure for a more balanced portfolio.

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 could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. By adjusting the allocation among the current holdings, the portfolio could potentially achieve a more efficient balance between risk and return. This process involves finding the optimal mix of assets that maximizes expected returns for a given level of risk. Investors should consider consulting with a financial advisor to explore optimization strategies and enhance portfolio performance.

Dividends Info

  • Schwab Fundamental U.S. Small Company Index ETF 1.70%
  • Global X NASDAQ 100 Covered Call ETF 11.50%
  • Financial Select Sector SPDR® Fund 1.00%
  • Weighted yield (per year) 3.87%

The portfolio's dividend yield stands at 3.87%, with the Global X NASDAQ 100 Covered Call ETF contributing a substantial yield of 11.5%. Dividends can provide a steady income stream and enhance total returns, especially in volatile markets. However, relying heavily on high-yielding assets can introduce risks if dividend payments are cut. Investors should balance their focus on dividend yield with growth potential and consider reinvesting dividends to compound returns over time.

Ongoing product costs Info

  • Schwab Fundamental U.S. Small Company Index ETF 0.25%
  • Global X NASDAQ 100 Covered Call ETF 0.61%
  • SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES 0.03%
  • Financial Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.26%

The portfolio's total expense ratio (TER) is 0.26%, with the Global X NASDAQ 100 Covered Call ETF having the highest cost at 0.61%. While the overall costs are relatively low, reducing expenses can improve long-term returns. Lower-cost funds, particularly index funds, can provide similar exposure at a reduced cost. Investors should regularly review their portfolio's fees and consider replacing higher-cost investments with more cost-effective alternatives to maximize net returns.

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