Balanced portfolio with strong US focus and high equity concentration
Report created on Dec 23, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
SP SPDR® Portfolio S&P 500 ETF
SPLG - US78464A8541 28.04% -
FN FIDELITY ZERO LARGE CAP INDEX FUND
FNILX 17.53% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 17.07% -
JP JPMorgan Chase & Co
JPM - US46625H1005 16.56% -
VW Vanguard FTSE Emerging Markets Index Fund ETF Shares
VWO - US9220428588 7.93% -
QQ Invesco NASDAQ 100 ETF
QQQM - US46138G6492 7.62% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 5.25%
This portfolio predominantly comprises equity-based investments, with a significant portion in ETFs and a single common stock. The SPDR® Portfolio S&P 500 ETF is the largest holding at 28.04%, followed by the Fidelity Zero Large Cap Index Fund and Schwab U.S. Dividend Equity ETF. Compared to typical balanced portfolios, this one leans heavily toward equities, which can lead to higher potential returns but also increased volatility. Balancing this with more fixed-income assets could provide more stability over time.
Growth
Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 15.43%, outperforming many benchmarks. The maximum drawdown was -26.41%, indicating significant volatility during downturns. This performance suggests robust growth potential but also highlights the need for risk management strategies. Considering historical performance helps set realistic expectations, but remember, past success doesn't guarantee future results. Regularly reviewing market conditions can help maintain this performance trajectory.
Projection
The Monte Carlo simulation, which estimates future portfolio performance using historical data, suggests a median outcome of 457.23% growth. This indicates potential for substantial returns, with 993 out of 1,000 simulations showing positive results. However, it's important to note that these projections are not certainties and can be influenced by market changes. Using such simulations can help investors prepare for various scenarios, but they should remain flexible to adjust strategies as needed.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio's allocation is heavily skewed towards stocks, making up over 99% of the total. This concentration in a single asset class increases exposure to market fluctuations and limits diversification benefits typically gained from a mix of asset types. Introducing bonds or other fixed-income securities could enhance diversification, reduce volatility, and provide a more balanced risk-return profile.
Sectors
- Financials 29%
- Technology 23%
- Health Care 8%
- Consumer Discretionary 8%
- Telecommunications 7%
- Industrials 7%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 2%
- Consumer Discretionary 2%
- Utilities 2%
- Real Estate 1%
The portfolio is notably concentrated in the Financial Services and Technology sectors, together comprising over 52% of the total. This sectoral concentration can lead to increased risk, especially during periods of sector-specific downturns. While these sectors offer growth potential, diversifying into less represented sectors like Utilities or Real Estate could mitigate risk and stabilize returns, especially during economic shifts.
Regions
- North America 87%
- Asia Emerging 6%
- Europe Developed 2%
- Asia Developed 2%
- Africa/Middle East 1%
- Japan 1%
- Latin America 1%
Geographically, the portfolio is predominantly invested in North America, with 86.72% exposure. This heavy regional focus limits international diversification and increases vulnerability to US market fluctuations. Exploring opportunities in underrepresented regions such as Europe or Latin America could enhance diversification and provide exposure to different economic cycles, potentially smoothing out overall portfolio volatility.
Redundant positions
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High correlationFIDELITY ZERO LARGE CAP INDEX FUNDSPDR® Portfolio S&P 500 ETF
The portfolio includes highly correlated assets, particularly between the Fidelity Zero Large Cap Index Fund and the SPDR® Portfolio S&P 500 ETF. Such correlations suggest that these assets may move similarly in response to market events, limiting diversification benefits. Reducing overlap by replacing one with a less correlated asset could enhance diversification and improve risk management, especially during market downturns.
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 Efficient Frontier analysis suggests potential for optimizing the portfolio's risk-return ratio by adjusting current asset allocations. However, before optimizing, addressing the highly correlated assets is crucial to truly enhance diversification. Efficient Frontier optimization focuses on achieving the best possible risk-adjusted returns, but it's important to balance this with personal investment goals and risk tolerance.
Dividends
- JPMorgan Chase & Co 1.90%
- Invesco NASDAQ 100 ETF 0.50%
- Schwab U.S. Dividend Equity ETF 3.70%
- SPDR® Portfolio S&P 500 ETF 0.90%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.80%
- Vanguard Total International Stock Index Fund ETF Shares 1.60%
- Weighted yield (per year) 1.38%
The portfolio has a modest total dividend yield of 1.38%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.7%. Dividends can provide a steady income stream, which is beneficial for risk-averse investors seeking regular returns. However, focusing on higher-yielding assets could improve income without significantly altering the overall risk profile, especially if reinvested to compound growth.
Ongoing product costs
- Invesco NASDAQ 100 ETF 0.15%
- Schwab U.S. Dividend Equity ETF 0.06%
- SPDR® Portfolio S&P 500 ETF 0.02%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.04%
The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance as it minimizes the drag on returns. Lower costs mean more of your investment's growth is retained, enhancing compounding effects over time. Continuously monitoring and minimizing costs by opting for low-fee funds can further improve net returns and align with best investment practices.
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