A growth-focused portfolio with high dividend yield and significant financial sector concentration

Report created on Dec 7, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards common stock, with a significant portion allocated to Prospect Capital Corporation. The rest of the portfolio is diversified across various ETFs focusing on dividends, broad market exposure, technology, healthcare, and emerging markets. This composition suggests a focus on growth with a strong income component from dividends. Understanding the balance between high dividend-yielding stocks and growth-oriented ETFs is crucial, as it can impact both income and capital appreciation potential. To optimize, consider the balance between these high-yield and growth assets to align with growth objectives.

Growth Info

Historically, the portfolio has shown a Compound Annual Growth Rate (CAGR) of 13.55%, which is relatively strong. However, it also experienced a maximum drawdown of -34.6%, indicating significant volatility. This volatility is important because it reflects the potential for large swings in portfolio value. While past performance is not indicative of future results, understanding these trends can help in setting realistic expectations. To mitigate potential future drawdowns, consider introducing assets that historically perform well during market downturns.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes based on historical data. With a median projection showing a 431.21% increase, there's a strong potential for growth. However, the 5th percentile outcome of 19.96% highlights the risk of lower returns. Such simulations use past data to estimate future performance, but they can't account for unprecedented events. This range of outcomes underscores the importance of maintaining a diversified portfolio to manage risk and optimize potential returns. Regularly reviewing and adjusting the portfolio based on changing market conditions can improve future projections.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is almost entirely composed of stocks, with negligible allocations to cash and other asset classes. This heavy stock concentration increases exposure to market volatility but also offers potential for higher returns. Stocks typically provide growth over the long term, but lack of diversification into bonds or other asset classes could increase risk. To enhance risk management, consider diversifying into other asset classes like bonds or real estate, which can provide stability and income, especially during periods of stock market volatility.

Sectors Info

  • Financials
    38%
  • Technology
    20%
  • Health Care
    13%
  • Industrials
    7%
  • Consumer Discretionary
    6%
  • Energy
    4%
  • Consumer Staples
    4%
  • Telecommunications
    3%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is notably concentrated in the financial services sector, making up over 37% of the allocation. While this can benefit from sector-specific growth, it also increases risk if the sector underperforms. A well-balanced sector allocation helps mitigate risks associated with sector downturns. To achieve better balance, consider reallocating some of the financial sector investments into underrepresented sectors like utilities or real estate, which can provide stability and diversification benefits.

Regions Info

  • North America
    83%
  • Europe Developed
    5%
  • Asia Emerging
    5%
  • Asia Developed
    2%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

With over 82% of assets allocated to North America, the portfolio has limited geographic diversification. This concentration means that the portfolio's performance is heavily tied to the North American economy. Geographic diversification is important because different regions can perform differently under various economic conditions. To reduce geographic risk, consider increasing exposure to regions like Europe, Asia, or emerging markets, which can offer growth opportunities and reduce reliance on a single economic region.

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 potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. This involves adjusting the current asset allocation to maximize returns for a given level of risk. By reallocating between existing assets, the portfolio can achieve a more efficient balance, enhancing potential returns while managing risk. Regularly reassessing the portfolio's position on the Efficient Frontier can ensure it remains aligned with the investor's risk tolerance and return objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Prospect Capital Corporation 14.60%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Vanguard Health Care Index Fund ETF Shares 1.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Technology Select Sector SPDR® Fund 0.70%
  • Weighted yield (per year) 5.26%

The portfolio boasts a strong total dividend yield of 5.26%, primarily driven by Prospect Capital Corporation's high yield. Dividends provide a steady income stream, which can be reinvested for compound growth or used as income. However, reliance on high-yield stocks can also introduce risk if dividends are cut. To maintain a balanced income strategy, ensure diversification across dividend-paying stocks and ETFs to mitigate the risk of dividend cuts from any single investment.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Health Care Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Technology Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio is 0.06%, which is relatively low, indicating efficient cost management. Lower costs mean more of the portfolio's returns are retained by the investor. This is important because high costs can erode returns over time. While the current costs are low, regularly reviewing and comparing expense ratios of similar funds can help ensure continued cost efficiency. Consider switching to lower-cost alternatives if available, without compromising on the portfolio's overall strategy and goals.

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