Balanced Portfolio with Strong US Focus and Moderate Diversification Offering Steady Growth Potential

Report created on Nov 27, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of a mix of ETFs with a significant 50% allocation to the Vanguard S&P 500 ETF, followed by 25% in Schwab U.S. Dividend Equity ETF. This setup provides a solid foundation in large-cap U.S. equities. Additionally, it includes a 10% allocation to the iShares Russell 2000 ETF and another 10% in Vanguard FTSE Emerging Markets ETF, adding exposure to small-cap U.S. stocks and emerging markets. A modest 5% allocation to the iShares U.S. Treasury Bond ETF adds a touch of stability. Overall, this moderately diversified portfolio leans heavily on U.S. equities, offering growth potential with some risk mitigation.

Growth Info

Historically, the portfolio shows a commendable CAGR of 11.94%, indicating strong growth over time. However, it's not without risk, as evidenced by a maximum drawdown of -32.7%. This suggests that while the portfolio has the potential for significant returns, it can also experience substantial declines during market downturns. The concentration of returns in just 30 days highlights the importance of staying invested to capture these gains. A disciplined, long-term approach is essential to weather market volatility and maximize returns.

Projection Info

Using a Monte Carlo simulation, the portfolio's future performance was analyzed with 1,000 simulations assuming a hypothetical initial investment. The simulation projects a 50th percentile end portfolio value of 190.4%, with a 67th percentile value reaching 289.07%. Notably, 943 simulations resulted in positive returns, with an annualized return of 9.11%. This analysis underscores the portfolio's potential for growth while acknowledging the inherent uncertainties of market performance. Diversification and risk management remain crucial for optimizing future outcomes.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio is heavily weighted towards stocks, comprising 94.53% of the total allocation, with minimal exposure to bonds at 4.97%. This stock-heavy allocation aligns with a growth-oriented strategy, but it also exposes the portfolio to higher volatility. While the inclusion of a small percentage of bonds provides some stability, it may not be sufficient for those seeking significant risk reduction. Consideration could be given to adjusting the asset mix to better align with risk tolerance and investment goals, potentially incorporating more fixed-income assets for balance.

Sectors Info

  • Technology
    23%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Consumer Staples
    7%
  • Telecommunications
    7%
  • Energy
    6%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation is diverse, with technology leading at 22.54%, followed by financial services and healthcare. This diversified sector exposure provides a balanced approach to capturing growth across various industries. However, the heavy reliance on technology could lead to increased volatility, given the sector's inherent fluctuations. Maintaining a diversified sector allocation is crucial to mitigating risks associated with sector-specific downturns. Periodic reviews of sector performance and rebalancing can help ensure alignment with long-term objectives and risk tolerance.

Regions Info

  • North America
    84%
  • Asia Emerging
    6%
  • Asia Developed
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Europe Developed
    1%

Geographically, the portfolio is predominantly concentrated in North America, with 84.42% of assets allocated to this region. While this focus on the U.S. market provides stability and growth potential, it limits exposure to international markets. Emerging markets and developed Asia have modest allocations, offering some diversification benefits. Expanding geographic diversification could enhance the portfolio's resilience to regional economic fluctuations. A broader international allocation may also capture growth opportunities in underrepresented regions, balancing global risks and returns.

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 optimization chart suggests potential for enhancing performance by adjusting the risk-return balance. Moving along the efficient frontier, investors can achieve a riskier or more conservative portfolio. To reduce risk, consider increasing bond allocations, while those seeking higher returns might lean towards equities. Before optimization, focus on aligning the portfolio with investment goals and risk tolerance. Optimizing diversification and asset allocation can improve risk-adjusted returns, but it's essential to ensure changes align with long-term objectives and personal circumstances.

Dividends Info

  • iShares U.S. Treasury Bond ETF 3.10%
  • iShares Russell 2000 ETF 1.10%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.96%

The portfolio offers a respectable total dividend yield of 1.96%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.3%. This yield provides a steady income stream, adding an element of stability to the portfolio. Dividend-paying stocks can also offer downside protection during market volatility. To enhance income potential, consider increasing allocations to dividend-focused investments, while ensuring alignment with overall investment goals and risk tolerance. Balancing growth and income is key to optimizing long-term portfolio performance.

Ongoing product costs Info

  • iShares U.S. Treasury Bond ETF 0.05%
  • iShares Russell 2000 ETF 0.19%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

With a total expense ratio (TER) of 0.06%, the portfolio is cost-efficient, minimizing the drag on returns. The Vanguard S&P 500 ETF and Schwab U.S. Dividend Equity ETF contribute to this low-cost structure, with expense ratios of 0.03% and 0.06%, respectively. Keeping investment costs low is crucial for maximizing net returns over time. Regularly reviewing and optimizing the cost structure can ensure continued efficiency. Consider monitoring expense ratios and exploring opportunities to further reduce costs without compromising on diversification or performance.

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