A balanced portfolio with a strong focus on US equities and moderate dividend yield

Report created on Dec 19, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of three primary ETFs: Vanguard S&P 500 ETF, Schwab U.S. Dividend Equity ETF, and Vanguard Growth Index Fund ETF Shares. With a 50% allocation to the S&P 500 ETF, the portfolio heavily emphasizes large-cap US equities. The remaining 50% is split equally between dividend-focused and growth-oriented ETFs. This structure provides a blend of growth and income, but lacks diversification beyond US equities. A more varied asset allocation could help mitigate risks associated with market volatility.

Growth Info

Historically, the portfolio has delivered an impressive annualized return (CAGR) of 14.0%, albeit with a significant maximum drawdown of -33.08%. This indicates strong growth potential but also highlights vulnerability to market downturns. While past performance is not a guarantee of future results, it provides an insight into how the portfolio has navigated previous market conditions. Investors should be prepared for similar volatility in the future and consider strategies to protect against downside risk.

Projection Info

Using Monte Carlo simulations, the portfolio's forward projections indicate a wide range of potential outcomes. The simulations suggest a 50th percentile return of 493.72% and a 67th percentile return of 718.15%, with 994 out of 1,000 simulations yielding positive returns. Monte Carlo analysis uses historical data to model potential future performance, but it cannot predict exact outcomes or account for unforeseen market events. Investors should use these projections as a guide rather than a definitive forecast.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.68% in stocks and a negligible 0.32% in cash. This concentration in a single asset class can lead to higher volatility and increased exposure to market risk. Diversifying into other asset classes, such as bonds or alternative investments, could help stabilize returns and reduce risk. A more balanced allocation across asset classes could provide a buffer against equity market downturns.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    11%
  • Telecommunications
    9%
  • Industrials
    7%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    1%

Sector allocation is concentrated, with technology making up 31.49% of the portfolio, followed by financial services and consumer cyclicals. This concentration can amplify sector-specific risks, such as regulatory changes or economic shifts affecting a particular industry. While sectoral exposure can enhance growth potential, diversifying across a broader range of sectors can help mitigate risks associated with any single sector's underperformance.

Regions Info

  • North America
    100%

Geographically, the portfolio is overwhelmingly focused on North America, with 99.53% allocation. This lack of international exposure limits potential benefits from global diversification and increases vulnerability to regional economic downturns. Expanding geographic exposure to include emerging markets or developed regions outside of North America could provide additional growth opportunities and help spread risk across different economic landscapes.

Redundant positions Info

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

The portfolio's assets are highly correlated, particularly between the Vanguard S&P 500 ETF and the Vanguard Growth Index Fund ETF Shares. High correlation means that these assets tend to move in tandem, offering limited diversification benefits. Reducing overlap by incorporating less correlated assets can enhance risk management and improve the portfolio's resilience to market fluctuations. Diversifying with assets that have lower correlation can lead to a more balanced risk-return profile.

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.

Optimization using the Efficient Frontier suggests potential improvements by adjusting the current asset allocation. The goal is to achieve the best possible risk-return ratio based on existing assets. However, the portfolio's high correlation and limited diversification may restrict optimization benefits. Exploring alternative investments or rebalancing the current allocation could enhance efficiency. Investors should focus on achieving a balance between risk and return that aligns with their investment objectives.

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) 1.70%

The portfolio's overall dividend yield stands at 1.7%, primarily driven by the Schwab U.S. Dividend Equity ETF's 3.7% yield. Dividends can provide a steady income stream, which is particularly valuable during periods of market volatility. While growth-focused investments may offer higher capital appreciation, maintaining a balance with dividend-paying assets can enhance total returns and provide a cushion during downturns. Investors should assess their income needs and adjust the dividend component accordingly.

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%

Portfolio costs are low, with a total expense ratio (TER) of 0.04%. Keeping costs minimal is crucial for maximizing long-term returns, as fees can significantly erode gains over time. The expense ratios of the individual ETFs are competitive, ensuring that more of the portfolio's returns are retained by the investor. While costs are already low, investors should periodically review and compare fees to ensure they remain competitive and do not detract from potential returns.

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