A broadly diversified balanced portfolio with a strong emphasis on US stocks and growth potential

Report created on Jan 3, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted in ETFs, predominantly focused on large-cap US equities, with the SPDR S&P 500 ETF making up 40%. This composition leans towards a growth-oriented strategy, as evidenced by the significant allocation to the Schwab U.S. Large-Cap Growth ETF. Compared to a balanced benchmark, this portfolio has a higher concentration in equities, which can enhance growth potential but also increases volatility. To align more closely with a balanced benchmark, consider incorporating more fixed-income assets to provide stability and reduce risk.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 13.47%, which is impressive. However, it experienced a maximum drawdown of -33.7%, indicating significant volatility during downturns. This performance suggests that while the portfolio can generate substantial returns, it may also expose investors to considerable risks. For a balanced approach, consider strategies to mitigate drawdowns, such as diversifying into less volatile asset classes.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential future outcomes, suggests a wide range of possible returns. The median projection indicates a 337.44% increase, but the 5th percentile shows a much lower outcome of 30.7%. This variance underscores the uncertainty inherent in market predictions. While these simulations provide valuable insights, it's crucial to remember that past data cannot guarantee future results. Regularly reviewing and adjusting the portfolio to align with changing market conditions can help manage this uncertainty.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for over 99% of the allocation. This heavy reliance on equities can drive growth but also introduces higher volatility compared to a more diversified asset mix. In contrast, balanced benchmarks typically include a mix of stocks and bonds to smooth out returns over time. To enhance diversification and reduce risk, consider incorporating fixed-income securities or other asset classes like real estate or commodities.

Sectors Info

  • Technology
    32%
  • Financials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is tech-heavy, with technology stocks comprising over 31% of the portfolio. While this can drive growth, especially in bull markets, it also increases vulnerability to sector-specific downturns. Compared to a typical balanced benchmark, this concentration is higher, indicating a potential risk during periods of tech underperformance. Diversifying across sectors can help mitigate this risk and provide more stable returns through market cycles.

Regions Info

  • North America
    83%
  • Europe Developed
    6%
  • Asia Emerging
    5%
  • Asia Developed
    2%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with over 82% of assets allocated there. This concentration limits exposure to international markets, which can offer diversification benefits and growth opportunities. Compared to a global benchmark, this allocation is heavily skewed towards the US. To enhance geographic diversification, consider increasing exposure to emerging markets and developed regions outside North America.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the large-cap US equity ETFs. This correlation means these assets tend to move in tandem, reducing the diversification benefits within the portfolio. During market downturns, this can lead to amplified losses. To improve diversification, consider reducing exposure to overlapping assets and incorporating investments that have historically shown lower correlation with US equities.

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 possible risk-return ratio based on current assets. This involves adjusting the allocation among existing investments to achieve a more balanced risk and return profile. The current portfolio's high correlation among assets suggests an opportunity to optimize by diversifying into less correlated investments, potentially enhancing returns without increasing risk.

Dividends Info

  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • SPDR Russell Small Cap Completeness 1.00%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Value Index Fund ETF Shares 1.70%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 1.31%

The portfolio's dividend yield is relatively modest at 1.31%, with the highest yield from the Vanguard FTSE Emerging Markets ETF at 3.2%. While dividends provide a steady income stream, this portfolio's focus is more on growth rather than income. For investors seeking higher income, increasing allocations to higher-yielding assets or dividend-focused funds could enhance the portfolio's income-generating potential.

Ongoing product costs Info

  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • SPDR Russell Small Cap Completeness 0.03%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.03%

The portfolio's total expense ratio (TER) is impressively low at 0.03%, which is beneficial for long-term performance. Lower costs mean more of your investment returns stay in your pocket, compounding over time. This cost efficiency aligns well with best practices for portfolio management. It's important to regularly review fees to ensure they remain competitive and continue to support your investment goals.

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