A balanced portfolio with strong large-cap growth focus and limited emerging market exposure

Report created on Jan 17, 2025

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 heavily invested in U.S. large-cap growth stocks, with the Schwab U.S. Large-Cap Growth ETF making up over 41% of the total. This allocation leans towards growth, which can offer higher returns but also comes with increased volatility. While there is some diversification with dividend and value-focused ETFs, the portfolio is predominantly equity-based. Compared to typical balanced portfolios, this one is more concentrated in equities, potentially exposing it to market fluctuations. Consider adding fixed-income or alternative asset classes to balance risk and enhance stability.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 17.69%. This impressive growth rate suggests strong past performance, largely driven by the U.S. stock market's recent bull run. However, it's important to remember that past performance does not guarantee future results. The maximum drawdown of -25.33% indicates potential vulnerability during market downturns. To mitigate future risks, diversifying across different asset classes and regions could help cushion against market volatility.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. With 1,000 simulations, the median (50th percentile) outcome suggests a portfolio value increase of 728.43%. However, the 5th percentile shows a much lower return, highlighting the uncertainty and risk involved. This simulation underscores the importance of diversification and risk management, as relying solely on historical trends can be misleading. Consider stress testing the portfolio under various economic scenarios to better understand potential risks.

Asset classes Info

  • Stocks
    99%
  • No data
    1%

The portfolio is almost entirely composed of stocks, with a minimal allocation to cash. This high equity concentration can lead to significant growth but also increases risk, especially during market downturns. Compared to typical balanced portfolios, which often include bonds or other asset classes, this portfolio may benefit from greater diversification. Incorporating fixed-income securities or alternative investments could help stabilize returns and reduce volatility, providing a more balanced risk-return profile.

Sectors Info

  • Technology
    32%
  • Consumer Discretionary
    12%
  • Financials
    12%
  • Health Care
    11%
  • Telecommunications
    10%
  • Industrials
    7%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio is heavily weighted towards technology, which comprises over 32% of the total allocation. While tech stocks have driven recent market gains, they can also be more volatile, especially during interest rate hikes. Other sectors like consumer cyclicals and financial services also have significant representation. This sectoral concentration could expose the portfolio to sector-specific risks. To mitigate this, consider diversifying into underrepresented sectors like utilities or real estate, which may offer more stability and income potential.

Regions Info

  • North America
    93%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Africa/Middle East
    1%
  • Europe Developed
    1%

With over 93% of the portfolio's assets in North America, geographic diversification is limited. While U.S. markets have performed well recently, this concentration could expose the portfolio to regional economic downturns. Emerging markets and developed regions outside North America are underrepresented, which might limit growth opportunities. Expanding exposure to these areas could enhance diversification, providing a hedge against U.S. market volatility and potentially tapping into faster-growing economies.

Redundant positions Info

  • SPDR S&P 500 ETF Trust
    iShares Core S&P Total U.S. Stock Market ETF
    High correlation
  • Schwab U.S. Large-Cap Growth ETF
    Invesco QQQ Trust
    High correlation
  • Vanguard Value Index Fund ETF Shares
    Schwab U.S. Dividend Equity ETF
    High correlation

The portfolio includes several highly correlated assets, such as the SPDR S&P 500 ETF Trust and iShares Core S&P Total U.S. Stock Market ETF. High correlation means these assets tend to move in the same direction, reducing diversification benefits. During market downturns, this could lead to amplified losses. To improve diversification, consider reducing exposure to overlapping assets and adding those with lower correlation, which can help manage risk and improve the portfolio's resilience.

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 can potentially be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio based on current assets. Optimization involves adjusting allocations to achieve maximum expected return for a given level of risk. Before optimizing, address the issue of overlapping assets, as reducing correlation can enhance diversification benefits. Focus on maintaining a balance between growth and stability, ensuring that the portfolio aligns with your risk tolerance and investment goals.

Dividends Info

  • iShares Core MSCI Emerging Markets ETF 3.20%
  • iShares Core S&P Small-Cap ETF 2.00%
  • iShares Core S&P Total U.S. Stock Market ETF 0.90%
  • JPMorgan Equity Premium Income ETF 7.20%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR S&P 500 ETF Trust 0.90%
  • Vanguard Value Index Fund ETF Shares 2.30%
  • Weighted yield (per year) 2.14%

With a total yield of 2.14%, the portfolio provides moderate income through dividends. The JPMorgan Equity Premium Income ETF stands out with a high yield of 7.2%, contributing significantly to the portfolio's income. Dividends can be an important component of total returns, especially in volatile markets. For investors seeking income, maintaining or slightly increasing exposure to high-dividend ETFs could enhance cash flow. However, ensure that dividend-focused investments align with overall growth and risk objectives.

Ongoing product costs Info

  • iShares Core MSCI Emerging Markets ETF 0.09%
  • iShares Core S&P Small-Cap ETF 0.06%
  • iShares Core S&P Total U.S. Stock Market ETF 0.03%
  • JPMorgan Equity Premium Income ETF 0.35%
  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR S&P 500 ETF Trust 0.10%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, which is beneficial for long-term performance. Lower costs mean more of your returns are retained, compounding over time. The majority of the ETFs have low fees, with the JPMorgan Equity Premium Income ETF being the highest at 0.35%. Regularly reviewing and comparing fees is advisable to ensure that the portfolio remains cost-effective. Consider replacing higher-cost assets with lower-cost alternatives if they offer similar exposure and performance.

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