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A cautious portfolio with strong U.S. focus and moderate diversification

Report created on Apr 2, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is composed predominantly of ETFs, with a significant 74% in stocks, 16% in bonds, and smaller allocations to cash and other assets. The largest position is the SPDR® Portfolio S&P 500 ETF at 18%. Compared to a typical benchmark, this portfolio leans heavily on equities, especially in the U.S. market, which can provide growth but also increases exposure to market volatility. To enhance diversification, consider balancing stock and bond allocations more evenly, especially if risk tolerance is low.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 8.85% and a maximum drawdown of -17.29%. This indicates resilience during downturns, but also highlights periods of significant loss. Compared to a typical benchmark, these figures suggest competitive performance. However, remember that past performance doesn't guarantee future results. To mitigate potential losses, consider strategies that could reduce volatility, such as diversifying across more asset classes.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates an annualized return of 9.93% across 1,000 simulations. While this suggests robust potential growth, it's important to note that simulations rely on past data and can't predict future events. The portfolio's projected median outcome is favorable, but be aware of the inherent uncertainties in such forecasts. Regularly reviewing and adjusting allocations can help align with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    74%
  • Bonds
    16%
  • Cash
    4%
  • Other
    3%

The asset class allocation shows a strong preference for stocks, making up 74% of the portfolio. Bonds account for 16%, while cash and other assets are minimal. This allocation aligns with a growth-focused strategy but may not suit investors seeking stability. Compared to typical benchmarks, the stock allocation is high, which can lead to greater volatility. To enhance diversification and stability, consider increasing bond or cash holdings, especially if nearing retirement or with lower risk tolerance.

Sectors Info

  • Technology
    18%
  • Financials
    12%
  • Health Care
    10%
  • Energy
    7%
  • Industrials
    7%
  • Consumer Discretionary
    6%
  • Consumer Staples
    6%
  • Telecommunications
    5%
  • Real Estate
    4%
  • Basic Materials
    3%
  • Utilities
    2%

Sector exposure is varied, with technology leading at 18%, followed by financial services and healthcare. While this offers some balance, the concentration in technology can lead to increased volatility, particularly during interest rate hikes. Compared to benchmarks, this sector allocation is moderately diversified. It's important to stay informed about sector trends and consider rebalancing if certain sectors become overly dominant. This can help maintain a balanced risk profile and capitalize on emerging opportunities.

Regions Info

  • North America
    80%
  • Europe Developed
    7%
  • Japan
    1%
  • Asia Emerging
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with 80% exposure, and limited international diversification. This aligns with a U.S.-centric investment strategy but may expose the portfolio to regional risks. Compared to common benchmarks, this allocation is less globally diversified. To enhance geographic diversification, consider increasing exposure to international markets, particularly in emerging economies, which can provide growth opportunities and reduce reliance on a single region.

Market capitalization Info

  • Large-cap
    31%
  • Mega-cap
    25%
  • Mid-cap
    16%
  • Small-cap
    2%

The portfolio's market capitalization is skewed towards large-cap stocks, with 31% in big caps and 25% in mega caps. This focus on large companies can provide stability, but may limit exposure to the growth potential of smaller firms. Compared to benchmarks, the small-cap allocation is minimal, which could be an area for improvement. Diversifying across different market caps can help balance risk and return, potentially enhancing overall portfolio performance by capturing growth in smaller, dynamic companies.

Redundant positions Info

  • Vanguard High Dividend Yield Index Fund ETF Shares
    iShares U.S. Dividend and Buyback
    Schwab U.S. Dividend Equity ETF
    High correlation
  • Schwab U.S. Large-Cap Growth ETF
    Invesco S&P 500® Quality ETF
    SPDR® Portfolio S&P 500 ETF
    High correlation
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares
    Vanguard International High Dividend Yield Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated asset groups, such as dividend-focused ETFs and large-cap growth funds. High correlation means these assets tend to move together, which can limit diversification benefits during market downturns. To optimize risk management, consider reducing overlap by selecting funds with distinct investment strategies or geographic focuses. This can help achieve a more balanced portfolio, reducing the impact of market volatility and enhancing long-term growth potential.

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.

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The portfolio could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. However, before optimizing, focus on removing highly correlated assets that offer no diversification benefits. The current allocation may not be the most efficient, as a more optimized portfolio could achieve a higher expected return of 3.48% at the same risk level. Regularly reviewing asset correlations and adjusting allocations can help enhance efficiency and align with your risk tolerance.

Dividends Info

  • iShares U.S. Dividend and Buyback 1.30%
  • PIMCO 0-5 Year High Yield Corporate Bond Index Exchange-Traded Fund 4.40%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • iShares® 0-3 Month Treasury Bond ETF 4.50%
  • Invesco S&P 500® Quality ETF 0.60%
  • SPDR® Portfolio S&P 500 ETF 1.40%
  • Sierra Tactical Bond Fund Instl Class Shares 3.20%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 3.00%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.90%
  • Vanguard International High Dividend Yield Index Fund ETF Shares 4.40%
  • Energy Select Sector SPDR® Fund 2.30%
  • Weighted yield (per year) 2.23%

With a total yield of 2.23%, this portfolio provides a moderate income stream, bolstered by dividend-focused ETFs. Dividends can offer a stable return component, especially in volatile markets, appealing to income-seeking investors. However, the reliance on dividend yields should be balanced with growth opportunities. Regularly review dividend policies and consider reinvesting dividends to maximize compounding benefits. This approach can support both income needs and long-term growth objectives.

Ongoing product costs Info

  • iShares U.S. Dividend and Buyback 0.05%
  • PIMCO 0-5 Year High Yield Corporate Bond Index Exchange-Traded Fund 0.56%
  • iShares® Gold Trust Micro 0.09%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • abrdn Physical Silver Shares ETF 0.30%
  • Invesco S&P 500® Quality ETF 0.15%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Vanguard International High Dividend Yield Index Fund ETF Shares 0.22%
  • Energy Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is an impressively low 0.11%, which supports better long-term performance by minimizing costs. This is a strong alignment with best practices, as lower fees mean more of your investment returns stay in your pocket. While costs are currently well-managed, it's important to monitor any changes in fund fees and consider cost-effective alternatives if necessary. Keeping expenses low is a key factor in achieving optimal portfolio performance over time.

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