Balanced Portfolio with Strong Diversification and Moderate Risk for Growth-Oriented Investors in USA

Report created on Jul 26, 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

The portfolio consists of two ETFs and two common stocks, with a balanced split between domestic and international exposure. The SPDR S&P 500 ETF Trust and the Vanguard FTSE All-World ex-US Index Fund ETF Shares each have a 35% allocation, providing a solid foundation in both US and global equities. Apple Inc. and Johnson & Johnson each hold a 15% share, offering exposure to individual stocks in the technology and healthcare sectors. This composition ensures a diversified approach, reducing risk by spreading investments across various sectors and geographies.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 12.09%, demonstrating robust performance. The maximum drawdown of -31.94% indicates potential volatility during market downturns, which is a factor for consideration. With 32 days accounting for 90% of returns, this highlights the importance of staying invested during volatile periods to capture gains. Overall, the portfolio has shown resilience and the ability to generate growth over time, which aligns well with a balanced risk profile.

Projection Info

Using a Monte Carlo simulation with 1,000 simulations, the portfolio's future performance was analyzed. The simulation projects a range of potential outcomes, with a median (50th percentile) return of 377.06% and a positive return in 979 out of 1,000 simulations. This suggests a favorable outlook, with an annualized return of 14.13%. The Monte Carlo simulation helps visualize the potential risks and rewards, aiding in making informed investment decisions. Despite the positive projections, it's important to remain aware of market uncertainties.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, comprising 98.91% of the total allocation, with minimal exposure to cash and other assets. This high equity allocation aligns with a growth-focused strategy, but it also increases exposure to market volatility. While stocks offer potential for higher returns, they also carry greater risk. Balancing this with some fixed-income or alternative investments could add stability, particularly during market downturns. For those comfortable with equity risk, the current allocation may suffice.

Sectors Info

  • Technology
    31%
  • Health Care
    22%
  • Financials
    12%
  • Industrials
    8%
  • Consumer Discretionary
    8%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is diverse, with significant exposure to technology (31.22%) and healthcare (22.00%). Financial services, industrials, and consumer cyclicals also have notable allocations. This diversification across sectors helps mitigate risks associated with sector-specific downturns. However, the concentration in technology could expose the portfolio to volatility if the tech sector faces headwinds. Maintaining a well-rounded sector allocation can help cushion against market fluctuations and enhance long-term stability.

Regions Info

  • North America
    67%
  • Europe Developed
    14%
  • Asia Emerging
    6%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly North America-focused, with 67.24% of assets in the region. There's also exposure to Europe, Asia, and other regions, providing a global perspective. This geographic diversification helps reduce risks associated with economic downturns in any single region. However, the heavy North American weighting could limit potential growth from emerging markets. Balancing regional exposure can enhance opportunities for growth while managing risk.

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 is near the efficient frontier, indicating a good balance between risk and return. However, it's not the optimal portfolio, which suggests there might be room for improvement. Investors can adjust their risk level along the efficient frontier to align with their preferences. Moving towards a riskier or more conservative portfolio involves reallocating assets to achieve desired outcomes. Optimizing requires careful consideration of risk tolerance and financial objectives.

Dividends Info

  • Apple Inc 0.40%
  • Johnson & Johnson 2.40%
  • SPDR S&P 500 ETF Trust 1.20%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.89%

The portfolio has a total dividend yield of 1.89%, with contributions from Apple Inc., Johnson & Johnson, and the ETFs. Johnson & Johnson offers the highest yield at 2.4%, providing a steady income stream. While dividends add a layer of stability, the overall yield is modest. Investors seeking higher income might consider increasing allocations to dividend-focused investments. Balancing growth and income is key to achieving long-term financial objectives.

Ongoing product costs Info

  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.06%

The portfolio's costs are minimal, with total expense ratios (TER) of 0.06%. This low-cost structure is advantageous, as it minimizes the impact of fees on returns. Keeping costs low is a critical component of successful investing, as it allows more of the portfolio's gains to be retained. Continuously monitoring and managing expenses can help maximize the portfolio's performance over time. Maintaining a cost-effective approach is essential for achieving financial goals.

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