A balanced portfolio with strong US focus and diversified sector exposure

Report created on Jan 10, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed primarily of ETFs, with a significant allocation to US equities. The Vanguard Total Stock Market Index Fund ETF Shares holds the largest share at 40%, providing broad market exposure. The Schwab U.S. Dividend Equity ETF adds a focus on income-generating stocks. This composition aligns well with a balanced risk profile, offering a mix of growth and income. While the portfolio is highly diversified across sectors, the heavy US focus may limit exposure to international growth opportunities. Consider rebalancing to include more global assets for enhanced diversification.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 11.23%, significantly outperforming many benchmarks. However, it experienced a maximum drawdown of -32.63%, indicating vulnerability during market downturns. This performance suggests a robust return potential but also highlights the importance of risk management. To mitigate future drawdowns, consider diversifying further into less correlated assets or incorporating fixed-income securities to balance volatility.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the median outcome projects a 234.66% increase in portfolio value, while the worst-case scenario still predicts a positive return. Although simulations provide valuable insights, they rely on past data and cannot predict future market conditions. It's important to regularly review and adjust the portfolio to adapt to changing economic environments.

Asset classes Info

  • Stocks
    94%
  • Cash
    6%

The portfolio's allocation is heavily skewed towards stocks, with 94.2% in this asset class. This high equity exposure aligns with a growth-oriented strategy but can increase volatility. The small cash allocation (5.8%) provides liquidity but may not significantly reduce risk. Compared to typical balanced portfolios, this composition is more aggressive, which may not suit all investors. To enhance stability, consider adding bonds or other fixed-income assets to create a more balanced risk-return profile.

Sectors Info

  • Technology
    23%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation shows a significant tilt towards technology, making up 22.8% of the portfolio. Other major sectors include financial services and healthcare. This distribution is relatively aligned with global benchmarks, though the tech concentration may increase volatility, especially during economic shifts. To reduce sector-specific risks, consider diversifying into underrepresented sectors like real estate or utilities, which can offer more stability during market fluctuations.

Regions Info

  • North America
    71%
  • Europe Developed
    8%
  • Asia Emerging
    6%
  • Japan
    3%
  • Asia Developed
    3%
  • Africa/Middle East
    1%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, with 71.3% exposure. This concentration may limit international growth potential and increase vulnerability to regional economic downturns. While developed markets in Europe and Asia are represented, emerging markets are underweighted. To enhance global diversification, consider increasing allocations to emerging markets or other regions with higher growth prospects, potentially improving the risk-return balance.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund and the Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, which can reduce diversification benefits. In downturns, this could lead to increased volatility. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the rest of the portfolio, thereby enhancing 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 could benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. Currently, the presence of highly correlated assets suggests potential inefficiencies. By reallocating within existing assets to reduce overlap and enhance diversification, the portfolio could achieve a more optimal balance. This approach focuses on maximizing returns for a given level of risk, rather than just minimizing risk.

Dividends Info

  • SPDR® Bloomberg 1-3 Month T-Bill ETF 5.00%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 2.16%

With a total dividend yield of 2.16%, this portfolio provides moderate income, primarily from the Schwab U.S. Dividend Equity ETF. Dividends can offer a stable income stream, which is beneficial for investors seeking regular cash flow. This yield is competitive, though not exceptional, compared to income-focused portfolios. To potentially increase income, consider adding higher-yielding assets or funds, while balancing this with the need for capital appreciation.

Ongoing product costs Info

  • SPDR® Bloomberg 1-3 Month T-Bill ETF 0.14%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, which supports better long-term performance by minimizing costs. Lower fees mean more of your returns are retained, enhancing compounding over time. This cost efficiency aligns with best practices for maximizing net returns. Maintaining low costs should remain a priority, but ensure that the focus on fees doesn't compromise the quality and diversification of the portfolio.

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