A balanced portfolio with a strong focus on U.S. equities and moderate dividend yield
Report created on Jan 13, 2025Risk profile
4/7
Diversification profile
3/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 70.00% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 20.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 10.00%
This portfolio primarily consists of U.S. equities, with a substantial 70% allocation to the Vanguard Total Stock Market Index Fund. The Schwab U.S. Dividend Equity ETF makes up 20%, enhancing income through dividends. The remaining 10% is allocated to international stocks via the Vanguard Total International Stock Index Fund. This composition leans heavily towards equities, which aligns with a balanced risk profile but may expose the portfolio to market volatility. Consider adding bonds or alternative assets to further diversify and reduce risk, especially during market downturns.
Growth
Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 12.48%. This indicates strong growth potential, especially when compared to typical benchmarks. However, the maximum drawdown of -34.44% highlights significant volatility during downturns. While past performance is not a guarantee of future results, it suggests that the portfolio can generate substantial returns over time. To mitigate the impact of potential future drawdowns, consider incorporating assets that have historically shown resilience in volatile markets.
Projection
Monte Carlo simulations, which use historical data to predict future outcomes, project a wide range of potential portfolio values. With a median return of 295.89%, the simulations suggest promising growth, though the 5th percentile outcome of 34.97% underscores potential risks. These simulations are based on past data, which may not accurately predict future market conditions. To prepare for various scenarios, regularly review your portfolio and adjust allocations to align with changing market dynamics and personal financial goals.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is overwhelmingly allocated to stocks, comprising over 99% of the total assets. While this could drive high returns, it also increases exposure to market volatility. Compared to benchmarks, this allocation lacks diversification into other asset classes like bonds or real estate, which could provide stability and income. To enhance diversification, consider incorporating a mix of asset classes that traditionally have low correlation with equities, potentially smoothing returns over time.
Sectors
- Technology 25%
- Financials 16%
- Health Care 12%
- Consumer Discretionary 11%
- Industrials 10%
- Telecommunications 7%
- Consumer Staples 7%
- Energy 5%
- Basic Materials 3%
- Real Estate 2%
- Utilities 2%
Sector allocation is led by technology, which represents nearly 25% of the portfolio, followed by financial services and healthcare. This concentration in tech could lead to higher volatility, especially during periods of regulatory scrutiny or interest rate changes. While the sector mix aligns with common benchmarks, consider diversifying further into underrepresented sectors like utilities or real estate to balance potential risks and capitalize on different economic cycles.
Regions
- North America 90%
- Europe Developed 4%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 1%
- Australasia 1%
Geographic exposure is heavily skewed towards North America, with over 90% of the portfolio invested in this region. While this aligns with a U.S.-centric investment strategy, it limits international diversification. Exposure to emerging markets is minimal, which could restrict growth opportunities. To enhance geographic diversification, consider increasing allocations to regions with different economic drivers, such as Asia or Europe, to potentially benefit from global growth trends.
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 aims to achieve the best possible risk-return balance. This involves adjusting allocations among existing assets to enhance returns for a given level of risk. While the current allocation is strong, optimizing could identify small shifts that improve efficiency. Regularly reassess the portfolio's positioning on the Efficient Frontier to ensure it remains aligned with your risk tolerance and investment objectives.
Dividends
- Schwab U.S. Dividend Equity ETF 3.70%
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Vanguard Total International Stock Index Fund ETF Shares 3.40%
- Weighted yield (per year) 1.99%
The portfolio's dividend yield is relatively modest at 1.99%, driven by the Schwab U.S. Dividend Equity ETF and the Vanguard Total International Stock Index Fund. Dividends provide a steady income stream, which can be reinvested for compounded growth. For investors seeking higher income, consider increasing exposure to high-dividend-paying stocks or funds. However, balance is key, as excessive focus on dividends may compromise growth potential.
Ongoing product costs
- Schwab U.S. Dividend Equity ETF 0.06%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.04%
The total expense ratio (TER) of the portfolio is impressively low at 0.04%, reflecting efficient cost management. Low fees enhance long-term returns by minimizing the drag on performance. This aligns well with best practices for cost-effective investing. Continue monitoring costs and explore opportunities to reduce them further, such as by replacing higher-fee funds with equivalent lower-cost options, to maximize net returns over time.
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