Balanced portfolio with a strong U.S. focus and significant sector concentration

Report created on Dec 21, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio heavily leans on the Vanguard Total Stock Market Index Fund ETF, which makes up 79% of the total allocation. This substantial weighting in a single ETF suggests a strong focus on broad U.S. market exposure, providing a solid foundation for growth. However, the remaining assets are evenly distributed among six other securities, each holding approximately 3%. While this distribution offers some diversification, the portfolio's overall asset concentration is high, potentially limiting its ability to mitigate risk effectively. To enhance diversification, consider adjusting the asset allocation to include a broader mix of asset classes and securities.

Growth Info

Historically, the portfolio has delivered a robust compound annual growth rate (CAGR) of 13.36%, indicating strong past performance. The maximum drawdown of -16.45% suggests moderate volatility, which is expected in a balanced portfolio. Comparing this to typical market benchmarks, the returns are impressive, although it's essential to remember that past performance doesn't guarantee future results. The portfolio's performance is concentrated in just 11 days, highlighting the importance of staying invested to capture these gains. Consider maintaining a long-term perspective to benefit from these historical trends.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the 50th percentile projects a 193.19% increase, while the 5th percentile indicates a potential -9.98% loss. Although 93.5% of simulations show positive returns, it's crucial to understand that these projections are not guarantees. They provide a probabilistic view, highlighting both potential gains and risks. To better prepare for various outcomes, consider diversifying further and regularly reviewing the portfolio's alignment with personal risk tolerance and investment goals.

Asset classes Info

  • Stocks
    99%

The portfolio is overwhelmingly concentrated in stocks, accounting for over 99% of the total allocation. This heavy reliance on a single asset class can lead to increased volatility, especially during market downturns. In contrast, a more diversified portfolio might include bonds, real estate, or other asset types to balance risk and return. Although stock-heavy portfolios can offer higher growth potential, they also expose investors to greater risk. To enhance stability, consider incorporating other asset classes that align with your investment strategy and risk tolerance.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    10%
  • Energy
    9%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Real Estate
    5%
  • Consumer Staples
    5%
  • Utilities
    2%
  • Basic Materials
    2%

The portfolio shows a notable concentration in the technology sector, which comprises approximately 26.66% of the total allocation. While this can drive growth, it also introduces sector-specific risks, especially if market conditions change. Other sectors, such as financial services and healthcare, also have significant representation, offering some diversification. However, the lack of balance across sectors could lead to increased volatility. To mitigate this risk, consider rebalancing to ensure a more even distribution across sectors, potentially enhancing resilience against sector-specific downturns.

Regions Info

  • North America
    100%

Geographically, the portfolio is heavily weighted towards North America, with over 99% of assets allocated in this region. While this focus aligns with the portfolio's U.S. market exposure, it limits diversification by excluding other global markets. This concentration can increase vulnerability to regional economic downturns or political events. To enhance geographic diversification and reduce regional risk, consider adding exposure to international markets. This can provide access to growth opportunities in different economic environments and potentially improve the overall risk-return profile.

Redundant positions Info

  • iShares Core Dividend Growth ETF
    Schwab U.S. Dividend Equity ETF
    High correlation

The portfolio includes highly correlated assets, specifically the iShares Core Dividend Growth ETF and Schwab U.S. Dividend Equity ETF. These assets tend to move in tandem, reducing the diversification benefits they provide. High correlation can limit the portfolio's ability to cushion against market fluctuations, as assets may react similarly to economic changes. To improve diversification, consider replacing one of these ETFs with a less correlated asset or adjusting the allocation to include complementary investments that offer distinct performance characteristics.

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, a concept that identifies the best possible risk-return ratio for a given set of assets. Currently, the portfolio's high concentration in correlated assets may prevent it from reaching optimal efficiency. By adjusting allocations to reduce correlation and enhance diversification, the portfolio could achieve a more favorable risk-return balance. Consider exploring alternative assets or reallocating to improve this efficiency, keeping in mind that optimization is based solely on the current assets and doesn't necessarily mean adding new investments.

Dividends Info

  • Chevron Corp 4.60%
  • iShares Core Dividend Growth ETF 2.30%
  • Enbridge Inc 6.50%
  • JPMorgan Nasdaq Equity Premium Income ETF 9.40%
  • Main Street Capital Corporation 6.80%
  • Realty Income Corp 5.90%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Weighted yield (per year) 1.89%

The portfolio's dividend yield stands at 1.89%, with contributions from several dividend-paying stocks and ETFs. Notably, the JPMorgan Nasdaq Equity Premium Income ETF offers a high yield of 9.4%, enhancing income potential. Dividends can provide a steady income stream, beneficial for reinvestment or income-focused investors. However, the overall yield is modest due to the significant weighting in the Vanguard Total Stock Market Index Fund ETF, which has a lower yield of 0.9%. Consider balancing growth and income by adjusting allocations to higher-yielding assets, if income is a priority.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, largely due to the Vanguard Total Stock Market Index Fund ETF's minimal costs. Low costs are advantageous as they help maximize net returns over time. While the JPMorgan Nasdaq Equity Premium Income ETF has a higher expense ratio of 0.35%, the overall impact is minimal due to its small allocation. Maintaining low costs is crucial for long-term performance, so continue to monitor fees and consider replacing any higher-cost assets with more affordable alternatives without compromising on quality or performance.

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