A balanced portfolio with a strong focus on US equities and growth potential

Report created on Jan 12, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of three ETFs: Vanguard S&P 500 ETF (50%), Vanguard Growth Index Fund ETF Shares (30%), and Schwab U.S. Dividend Equity ETF (20%). The allocation heavily favors U.S. large-cap equities, offering a blend of growth and dividend income. Compared to a typical balanced portfolio, this one lacks diversity in asset classes and geographic exposure. A more diversified allocation could include bonds or international equities to reduce reliance on U.S. market performance and enhance risk management.

Growth Info

The portfolio has shown strong historical performance with a Compound Annual Growth Rate (CAGR) of 14.49%. This impressive growth rate indicates significant past success, likely driven by a bullish U.S. equity market. However, it's important to remember that past performance does not guarantee future results. To maintain such growth, consider regular portfolio reviews and adjustments based on evolving market conditions and personal investment goals.

Projection Info

A Monte Carlo simulation, which uses historical data to predict future performance, suggests a 50th percentile return of 521.94% and a 67th percentile return of 746.2%. This indicates a favorable outlook, but it's crucial to understand that these projections are not certainties. They serve as a guide to potential outcomes, emphasizing the need to remain adaptable to changing market conditions and personal financial circumstances.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, accounting for over 99% of the total allocation. While this concentration can offer high growth potential, it also increases exposure to market volatility. A more balanced approach might involve incorporating other asset classes, such as bonds or real estate, to provide stability and reduce overall risk. This diversification can help cushion the portfolio during equity market downturns.

Sectors Info

  • Technology
    33%
  • Financials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    1%

With a significant allocation to the technology sector (33.42%), the portfolio is positioned to benefit from tech-driven growth. However, this concentration may also lead to higher volatility, especially during periods of regulatory change or tech sector downturns. Balancing exposure across sectors such as healthcare or consumer staples could provide more stability and reduce sector-specific risks, aligning closer with broader market benchmarks.

Regions Info

  • North America
    100%

The portfolio is overwhelmingly concentrated in North American assets (99.55%), limiting global diversification. This focus could expose the portfolio to regional economic fluctuations. Expanding geographic exposure to include emerging markets or developed regions outside North America can enhance diversification and potentially capture growth opportunities in different economic cycles. This strategy can also mitigate risks associated with regional downturns.

Redundant positions Info

  • Vanguard Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Growth Index Fund ETF Shares and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, reducing the diversification benefit. To optimize risk management, consider replacing one of these ETFs with a less correlated asset. This adjustment can improve the portfolio's resilience during market volatility by ensuring a broader range of responses to economic changes.

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 be optimized using the Efficient Frontier, which involves finding the best risk-return ratio for the current assets. However, the presence of highly correlated assets suggests that diversification could be improved first. By reducing overlap and adding less correlated assets, the portfolio can achieve a more efficient balance, potentially enhancing returns while managing risk more effectively.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.54%

The portfolio's dividend yield is 1.54%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.7%. Dividends provide a steady income stream, which can be reinvested to enhance growth. For investors seeking income, maintaining or increasing dividend-focused assets could be beneficial. However, it's important to balance this with growth-oriented investments to ensure overall portfolio growth aligns with long-term financial goals.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is a low 0.04%, which is excellent for long-term performance. Low costs mean more of your returns are retained, compounding over time. This cost efficiency is a strong feature of the current portfolio setup. Regularly reviewing and comparing these costs against other investment options can ensure continued cost-effectiveness and support better net returns.

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