A balanced portfolio focusing on diversified funds with moderate geographic concentration

Report created on Jan 24, 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 evenly split across four funds, each representing 25% of the total allocation. This even distribution suggests a balanced approach, reducing the risk associated with any single fund underperforming. Compared to benchmark compositions, which often diversify across more individual securities, this portfolio's structure may be slightly concentrated in terms of fund selection. This setup is beneficial for investors looking to simplify management while maintaining exposure to a broad range of sectors and geographies. Consider whether additional fund inclusion could further enhance diversification and reduce reliance on the performance of these specific funds.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 7.88%, indicating solid performance over time. The maximum drawdown of -32.93% highlights the potential volatility during market downturns, aligning with the balanced risk profile. Compared to benchmarks, this performance is commendable, suggesting the portfolio has navigated market fluctuations effectively. However, it's important to remember that past performance does not guarantee future results. Regularly reviewing performance against benchmarks can help ensure the portfolio continues to meet investment goals and risk tolerance.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. With a median (50th percentile) projection of a 164.9% increase, the outlook is optimistic. However, the 5th percentile showing a -6.9% result underscores the inherent uncertainty. The simulation's annualized return of 8.38% suggests potential for growth, but it's crucial to remember these projections are not guarantees. Regular portfolio reviews and adjustments can help navigate future market conditions, aligning with the investor's risk tolerance and goals.

Asset classes Info

  • Stocks
    97%
  • Cash
    3%

The portfolio is heavily weighted towards stocks, comprising 97% of the allocation, with a minor 3% in cash. This stock-heavy allocation implies potential for higher returns but also increased volatility. Compared to benchmarks, which may include a mix of bonds and other asset classes, this portfolio is less diversified. While this setup suits those seeking growth, incorporating bonds or alternative investments could provide stability during market downturns. Balancing asset classes can enhance diversification, potentially smoothing returns over time.

Sectors Info

  • Technology
    26%
  • Financials
    14%
  • Health Care
    12%
  • Industrials
    12%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation shows a notable concentration in technology at 26%, followed by financial services and healthcare. This aligns with common benchmarks but may expose the portfolio to sector-specific risks, such as tech volatility during interest rate hikes. The presence of other sectors like consumer cyclical and industrials suggests a balanced approach, but monitoring sector trends is crucial. Diversifying further across sectors could mitigate potential risks associated with economic shifts affecting specific industries, enhancing the portfolio's resilience.

Regions Info

  • North America
    84%
  • Europe Developed
    11%
  • Asia Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Latin America
    1%

The geographic allocation is predominantly North American at 84%, with limited exposure to Europe and Asia. This concentration aligns with the investor's region but may limit diversification benefits. Common benchmarks often include broader international exposure, which can reduce risk by spreading investments across different economic environments. Expanding geographic allocation, particularly in emerging markets, could enhance diversification and capture growth opportunities outside North America, balancing the portfolio against regional economic fluctuations.

Market capitalization Info

  • Mega-cap
    43%
  • Large-cap
    37%
  • Mid-cap
    16%
  • Small-cap
    1%

The portfolio's market capitalization is primarily in mega and big companies, comprising 80% of the allocation. This focus on larger, established firms suggests a preference for stability and lower risk compared to small-cap stocks. While this aligns with benchmarks, the minimal exposure to small and micro caps may limit growth potential. Including more small-cap stocks could increase diversification and potential returns, as these companies often offer higher growth prospects. Balancing market cap exposure can optimize risk and return.

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's current allocation can potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. This involves adjusting the weightings of existing assets to achieve maximum returns for a given level of risk. While the portfolio is already balanced, exploring optimization could enhance performance by fine-tuning allocations. It's important to note that optimization focuses on risk-return efficiency, not necessarily diversification or other investment goals. Regular reviews can ensure the portfolio remains aligned with the investor's objectives.

Dividends Info

  • INVESTMENT CO OF AMERICA CLASS A 0.80%
  • AMERICAN FUNDS FUNDAMENTAL INVESTORS CLASS A 0.60%
  • WASHINGTON MUTUAL INVESTORS FUND CLASS A 1.30%
  • CAPITAL WORLD GROWTH & INCOME FUND CLASS A 1.10%
  • Weighted yield (per year) 0.95%

With a total dividend yield of 0.95%, the portfolio provides a modest income stream. This yield is beneficial for investors seeking some income alongside potential capital appreciation. However, compared to high-dividend portfolios, the yield may be lower. For those prioritizing income, increasing exposure to dividend-focused funds or stocks could enhance returns. Balancing growth and income objectives ensures the portfolio meets the investor's financial goals, providing both income and long-term growth potential.

Ongoing product costs Info

  • INVESTMENT CO OF AMERICA CLASS A 0.58%
  • AMERICAN FUNDS FUNDAMENTAL INVESTORS CLASS A 0.60%
  • WASHINGTON MUTUAL INVESTORS FUND CLASS A 0.56%
  • CAPITAL WORLD GROWTH & INCOME FUND CLASS A 0.75%
  • Weighted costs total (per year) 0.62%

The portfolio's total expense ratio (TER) of 0.62% is reasonable, supporting better long-term performance by minimizing costs. Each fund's expense ratio remains below 1%, aligning with cost-efficient investing principles. Lower costs can significantly impact returns over time, enhancing overall portfolio performance. Regularly reviewing and optimizing fund expenses can further improve cost efficiency, ensuring more of the investment returns directly benefit the investor. Keeping costs in check is crucial for maximizing long-term growth potential.

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