A balanced portfolio with high US exposure and moderate dividend yield potential

Report created on Jan 8, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equity, with nearly 100% in stocks and a small fraction in cash and other assets. The Vanguard Total Stock Market Index Fund dominates the portfolio, comprising over 65% of the total allocation. This concentration in a single fund suggests a strong tilt towards comprehensive market exposure. While this approach captures broad market performance, it may lack diversification compared to a more balanced asset mix. Consider diversifying into other asset classes, such as bonds or real estate, to enhance stability and reduce volatility.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 13.9%, indicating robust growth over time. However, it also experienced a significant maximum drawdown of -38.69%, highlighting vulnerability during market downturns. The combination of high returns and high drawdowns suggests a risk-reward trade-off. While past performance is not indicative of future results, maintaining a diversified approach could help mitigate potential losses. Consider strategies to reduce drawdown risk, such as incorporating defensive assets or adjusting asset allocation.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 20.4%. These simulations use historical data to model future scenarios, providing insight into possible portfolio trajectories. However, it's important to note that these projections are not guaranteed and can vary significantly based on market conditions. The high number of simulations with positive returns is encouraging, but consider adjusting the portfolio to enhance resilience against negative outcomes. Regularly review and rebalance the portfolio to align with changing market dynamics.

Asset classes Info

  • Stocks
    100%

The portfolio's asset class allocation is heavily skewed towards stocks, with over 99% in equities. This concentration limits exposure to other asset classes, such as bonds or commodities, which can provide diversification benefits. While equities have historically offered strong returns, they also come with higher volatility. Consider incorporating a mix of asset classes to balance risk and reward. A more diversified asset allocation can help smooth returns and protect against market fluctuations, aligning better with a balanced investment profile.

Sectors Info

  • Technology
    27%
  • Financials
    12%
  • Health Care
    12%
  • Consumer Discretionary
    8%
  • Telecommunications
    8%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Utilities
    4%
  • Real Estate
    4%
  • Basic Materials
    3%
  • Consumer Discretionary
    1%

The sector allocation shows a significant emphasis on technology, representing over 27% of the portfolio. While tech has been a strong performer, this concentration may lead to increased volatility, especially during periods of regulatory scrutiny or interest rate changes. Other sectors, such as financial services and healthcare, are also well-represented, providing some diversification. To further enhance stability, consider balancing sector weights by increasing exposure to underrepresented areas. This approach can reduce sector-specific risks and improve overall portfolio resilience.

Regions Info

  • North America
    95%
  • Europe Developed
    2%
  • Asia Emerging
    2%
  • Asia Developed
    1%

Geographic exposure is predominantly focused on North America, accounting for nearly 95% of the portfolio. While this aligns with the client's US base, it limits diversification benefits from global markets. Exposure to Europe, Asia, and other regions is minimal, potentially missing out on growth opportunities abroad. Diversifying geographically can reduce country-specific risks and capture global economic trends. Consider increasing allocations to international markets to achieve a more balanced and globally diversified portfolio, enhancing long-term growth potential.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    VANGUARD 500 INDEX FUND ADMIRAL SHARES
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund and the Vanguard 500 Index Fund. High correlation means these assets tend to move together, reducing diversification benefits during market downturns. To enhance diversification, consider replacing one of these with an asset that has a lower correlation to the rest of the portfolio. This adjustment can improve risk management and provide a more stable investment experience. Regularly assess asset correlations to maintain an optimal balance.

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 can be optimized using the Efficient Frontier, which focuses on achieving the best possible risk-return ratio. By adjusting the allocation among current assets, it is possible to enhance efficiency without necessarily increasing diversification. The goal is to maximize returns for a given level of risk. Consider rebalancing the portfolio to align with the Efficient Frontier, ensuring that each asset contributes optimally to the overall risk-return profile. Regularly reassess the portfolio to maintain this optimization as market conditions evolve.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Invesco S&P 500® High Dividend Low Volatility ETF 3.40%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 1.69%

The portfolio's dividend yield stands at 1.69%, with contributions from various ETFs and funds. High-dividend ETFs like the Schwab U.S. Dividend Equity ETF and Invesco S&P 500 High Dividend Low Volatility ETF offer attractive yields. Dividends provide a steady income stream, which can be particularly beneficial during market volatility. However, focusing solely on dividends may limit growth potential. Balance between growth and income by considering both dividend-paying and growth-oriented investments. This approach can support long-term wealth accumulation while providing income.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Invesco S&P 500® High Dividend Low Volatility ETF 0.30%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.04%
  • 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) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, supporting better long-term performance by minimizing costs. Low-cost funds like Vanguard's ETFs contribute to this efficiency, aligning with best practices for cost management. Keeping expenses low is crucial for maximizing net returns over time. Regularly review the portfolio to ensure it remains cost-effective and consider replacing higher-fee assets with lower-cost alternatives. This strategy can enhance overall returns, especially in a long-term investment horizon.

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