A balanced portfolio with strong U.S. equity focus and moderate dividend yield

Report created on Dec 20, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

This portfolio is heavily weighted towards U.S. equities, with the Vanguard Total Stock Market Index Fund ETF Shares comprising 70% of the total allocation. The remaining assets include a mix of dividend-focused ETFs and individual stocks, each with smaller weightings. Compared to a typical balanced portfolio, this one is more concentrated in equities, which may increase potential returns but also heighten risk. To align closer with a balanced benchmark, consider diversifying into other asset classes like bonds or international equities, which can help manage volatility and enhance stability.

Growth Info

Historically, this portfolio has demonstrated a strong Compound Annual Growth Rate (CAGR) of 12.45%, indicating robust performance over time. The maximum drawdown of -16.44% suggests moderate resilience during downturns. These metrics compare favorably to many equity-focused benchmarks, suggesting effective asset selection. However, past performance doesn't guarantee future results. It's important to regularly review and adjust the portfolio to maintain performance, especially given market fluctuations and economic changes.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected across 1,000 scenarios. This method uses historical data to estimate a range of potential outcomes, showing a median return of 185.45%. While 930 simulations resulted in positive returns, it's crucial to remember that these projections are not guarantees. They provide a probabilistic view, highlighting the importance of diversification and risk management to navigate future uncertainties effectively.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily skewed towards stocks, comprising over 99% of the total allocation, with negligible cash and unclassified assets. While this stock-heavy allocation aligns with a growth strategy, it lacks the diversification that bonds or other asset classes could provide. Diversifying into different asset classes can reduce risk and potentially enhance returns, especially during market downturns when equities might underperform.

Sectors Info

  • Technology
    24%
  • Financials
    15%
  • Energy
    11%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    7%
  • Real Estate
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Utilities
    2%
  • Basic Materials
    2%

Sector-wise, the portfolio is concentrated in technology (24.5%) and financial services (15.4%), with significant exposure to energy and healthcare. This concentration could lead to higher volatility, particularly if these sectors face challenges. It's important to monitor sector trends as shifts in interest rates or regulations can impact performance. Balancing exposure across more sectors can help mitigate risks associated with sector-specific downturns.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly invested in North America (99.5%), with minimal exposure to other regions. While this focus on U.S. equities aligns with a domestic growth strategy, it limits the benefits of geographic diversification. Exposure to international markets can provide opportunities for growth and risk reduction, as different regions may perform well at different times due to varied economic conditions and cycles.

Redundant positions Info

  • Schwab U.S. Dividend Equity ETF
    iShares Core Dividend Growth ETF
    High correlation

The portfolio exhibits high correlation between certain assets, notably the Schwab U.S. Dividend Equity ETF and the iShares Core Dividend Growth ETF. High correlation means these assets tend to move in tandem, which can limit diversification benefits. 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 be optimized using the Efficient Frontier, which identifies the best risk-return ratio for the given assets. Currently, the portfolio could benefit from adjustments to reduce overlap and improve diversification. By reallocating assets to achieve a more efficient mix, the portfolio can potentially enhance returns for the same level of risk or reduce risk without sacrificing returns.

Dividends Info

  • Chevron Corp 4.60%
  • iShares Core Dividend Growth ETF 2.30%
  • Enbridge Inc 6.50%
  • JPMorgan Nasdaq Equity Premium Income ETF 9.40%
  • Main Street Capital Corporation 6.80%
  • Realty Income Corp 5.90%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 2.50%

The portfolio offers a total dividend yield of 2.5%, with notable contributions from individual stocks like Enbridge Inc (6.5%) and Main Street Capital Corporation (6.8%). Dividend income can provide a steady cash flow, which is appealing for income-focused investors. However, it's important to balance high-yielding assets with growth-oriented investments to ensure overall portfolio growth and sustainability.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

Portfolio costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This low cost structure supports better long-term performance by minimizing the drag on returns. Maintaining low costs is crucial, as fees can significantly erode gains over time. Regularly reviewing and optimizing the cost structure ensures that the portfolio remains efficient and aligned with investment goals.

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