A balanced US-focused portfolio with high tech exposure and strong dividend yield

Report created on Jan 30, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is composed entirely of ETFs, with each holding an equal 20% allocation. This even distribution suggests a balanced approach, yet all investments are concentrated in large-cap U.S. equities. Compared to a typical diversified benchmark, this portfolio lacks exposure to international markets and alternative asset classes. The focus on U.S. equities, while potentially beneficial in a strong domestic market, might limit growth opportunities globally. To enhance diversification, consider adding international equities or bonds, which could provide stability during U.S. market downturns.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 16.18%, outperforming many standard benchmarks. However, it has also experienced a maximum drawdown of -17.50%, indicating potential volatility during market declines. This performance highlights the portfolio's ability to generate strong returns but also underscores the need for risk management. To mitigate potential downturns, consider diversifying into less volatile asset classes or sectors, which could help smooth returns over time.

Projection Info

Monte Carlo simulations, which use historical data to model potential future outcomes, project a median portfolio growth of 735.1%. While this suggests promising potential, it's important to remember that these projections are not guarantees. The simulations show a high likelihood of positive returns, but market conditions can change. To prepare for various scenarios, regularly review and adjust your portfolio to align with changing market dynamics and personal financial goals.

Asset classes Info

  • Stocks
    96%
  • No data
    3%

The portfolio is heavily weighted towards stocks, comprising 96% of the total allocation, with a negligible allocation to cash. This heavy equity concentration can offer high growth potential but also increases exposure to market volatility. Compared to a more diversified benchmark, the lack of fixed-income assets might expose the portfolio to higher risk during market downturns. Consider introducing bonds or other low-correlation assets to balance risk and enhance portfolio stability, especially in volatile markets.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    13%
  • Telecommunications
    11%
  • Health Care
    9%
  • Financials
    8%
  • Consumer Staples
    6%
  • Industrials
    6%
  • Energy
    4%
  • Basic Materials
    1%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is significantly concentrated in the technology sector, which accounts for 39% of the total allocation. This tech-heavy focus can lead to significant growth during market upswings but may also result in increased volatility, especially during periods of rising interest rates or regulatory changes. To mitigate sector-specific risks, consider diversifying into underrepresented sectors such as utilities or real estate, which can provide stability and income during tech downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of the portfolio allocated to North American equities, the geographic exposure is highly concentrated. This focus on the U.S. market may benefit from domestic growth but limits exposure to international opportunities. Global diversification can help mitigate regional risks and capture growth in emerging markets. Consider reallocating a portion of the portfolio to international equities, which can enhance diversification and potentially improve risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    43%
  • Large-cap
    38%
  • Mid-cap
    15%
  • Small-cap
    1%

The portfolio predominantly holds large-cap stocks, with 43% in mega-cap and 38% in big-cap companies. This focus on large, established firms offers stability and reliable growth, but it may limit exposure to the higher growth potential of small and mid-cap stocks. Diversifying across different market capitalizations can provide a balance between stability and growth. Consider adding small-cap or mid-cap stocks to capture growth opportunities that large-cap stocks might miss.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Invesco NASDAQ 100 ETF
    Schwab U.S. Large-Cap Growth ETF
    JPMorgan Nasdaq Equity Premium Income ETF
    High correlation

The portfolio's assets exhibit high correlation, particularly among the Vanguard S&P 500 ETF, Invesco NASDAQ 100 ETF, Schwab U.S. Large-Cap Growth ETF, and JPMorgan Nasdaq Equity Premium Income ETF. High correlation means these assets tend to move together, reducing diversification benefits. In market downturns, this can lead to amplified losses. To improve diversification, consider including assets with lower correlation, such as international equities or bonds, which can provide a buffer during market volatility.

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, focusing on achieving the best possible risk-return ratio. However, the current high correlation among assets limits diversification benefits. Before optimizing, consider reducing overlapping positions to enhance diversification. Adjusting asset allocations to include less correlated investments can help achieve a more efficient portfolio, balancing risk and return more effectively.

Dividends Info

  • JPMorgan Nasdaq Equity Premium Income ETF 9.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 3.06%

The portfolio boasts a strong total dividend yield of 3.06%, with contributions from ETFs like the JPMorgan Nasdaq Equity Premium Income ETF at 9.50%. Dividends can provide a steady income stream and cushion against market volatility. For investors seeking income, maintaining or increasing exposure to high-dividend-paying assets is beneficial. However, ensure that dividend yields align with overall investment goals and risk tolerance, as high yields can sometimes indicate higher risk.

Ongoing product costs Info

  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is impressively low at 0.13%, with individual ETF costs ranging from 0.03% to 0.35%. Low costs support better long-term performance by minimizing the drag on returns. This efficient cost structure aligns well with best practices for maintaining a cost-effective portfolio. Continue to monitor expense ratios and consider switching to lower-cost alternatives if available, ensuring that cost savings do not compromise portfolio objectives or diversification.

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