A cautious portfolio with strong S&P 500 focus and limited diversification

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Cautious Investors

This portfolio suits an investor with a cautious risk tolerance and a focus on capital preservation. The significant allocation to U.S. large-cap equities provides growth potential, while the Treasury Money Fund offers stability and liquidity. Ideal for those with a medium to long-term investment horizon, it seeks steady returns while minimizing volatility. This approach is fitting for individuals prioritizing safety and income over aggressive growth, making it suitable for those nearing retirement or with a low-risk appetite. The portfolio's current structure aligns with these objectives, though diversification could be improved.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    49.00%
  • The Charles Schwab Family of Funds - Schwab U.S. Treasury Money Fund
    SNSXX
    37.00%
  • Intel Corporation
    INTC - US4581401001
    14.00%

The portfolio is heavily weighted towards the Vanguard S&P 500 ETF, comprising 49% of the total allocation. This indicates a strong focus on U.S. large-cap equities. Additionally, the Schwab U.S. Treasury Money Fund holds 37%, providing a safety net with low-risk, liquid assets. Intel Corporation represents 14%, adding a single-stock risk. Compared to a balanced benchmark, this composition lacks diversification across asset classes. A more varied asset mix could enhance risk management and improve stability during market fluctuations. Consider gradually introducing other asset types like international equities or real estate for broader exposure and reduced risk.

Growth Info

Historically, the portfolio achieved a Compound Annual Growth Rate (CAGR) of 7.53%, which is respectable for a cautious profile. The maximum drawdown of -24.14% indicates significant exposure to market downturns, likely due to the high S&P 500 allocation. Compared to a benchmark, this performance reflects typical market movements. While past performance provides context, it's essential to remember that it doesn't guarantee future results. To potentially stabilize returns, consider diversifying into different asset classes or sectors that may not move in tandem with the broader market.

Projection Info

A Monte Carlo simulation, running 1,000 scenarios, projects future outcomes based on historical data. The median simulation suggests a 68.2% increase in portfolio value, while the 5th percentile indicates a potential loss of 61.6%. With 715 simulations showing positive returns, the portfolio has a favorable outlook, though uncertainty remains. It's important to note that simulations use past data, which may not reflect future market conditions. To enhance projections, consider incorporating more diverse assets, which could buffer against unfavorable market shifts and provide a wider range of potential outcomes.

Asset classes Info

  • Stocks
    63%

The portfolio's asset allocation is heavily skewed towards stocks at 63%, with limited representation from other asset classes. This imbalance may expose the portfolio to equity market volatility, especially during downturns. Compared to a balanced benchmark, the lack of bonds or alternative investments diminishes diversification benefits. Introducing fixed income or alternative assets like commodities could provide stability and reduce overall risk. By diversifying asset classes, the portfolio could achieve a more consistent performance, especially in volatile market conditions.

Sectors Info

  • Technology
    29%
  • Financials
    7%
  • Health Care
    5%
  • Consumer Discretionary
    5%
  • Telecommunications
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Utilities
    1%
  • Real Estate
    1%
  • Basic Materials
    1%

Sector allocation reveals a strong concentration in technology at 29%, which could lead to heightened volatility, particularly during interest rate changes. Other sectors like financial services, healthcare, and consumer cyclicals are underrepresented. This concentration contrasts with more balanced benchmarks, which typically distribute exposure more evenly across sectors. To mitigate sector-specific risks, consider reallocating some technology exposure to sectors like utilities or consumer staples, which may offer more stability. A more balanced sector allocation can help smooth portfolio performance across different economic cycles.

Regions Info

  • North America
    63%
  • Europe Developed
    0%
  • Asia Developed
    0%

Geographically, the portfolio is predominantly focused on North America, with 63% of assets allocated there. This regional concentration limits exposure to international markets, which might offer growth opportunities and diversification benefits. Compared to a global benchmark, the lack of European or Asian assets reduces potential for capturing growth in emerging markets. To enhance geographic diversification, consider adding international equities or funds that focus on regions outside North America. This could help mitigate risks associated with domestic market fluctuations and provide access to global economic growth.

Market capitalization Info

  • Large-cap
    31%
  • Mega-cap
    23%
  • Mid-cap
    9%
  • Small-cap
    0%

The portfolio's allocation by market capitalization shows a focus on large and mega-cap stocks, with 31% in big caps and 23% in mega caps. This concentration suggests stability but may limit growth potential found in smaller companies. Medium and small caps are underrepresented, offering potential for higher returns but with increased risk. Compared to a diversified benchmark, this allocation lacks exposure to smaller market caps. Introducing small and mid-cap stocks could enhance growth potential and provide a more balanced risk-return profile, especially during periods of economic expansion.

Dividends Info

  • Intel Corporation 1.20%
  • The Charles Schwab Family of Funds - Schwab U.S. Treasury Money Fund 3.80%
  • Vanguard S&P 500 ETF 1.40%
  • Weighted yield (per year) 2.26%

The portfolio's dividend yield stands at 2.26%, with contributions from Intel Corporation, the Schwab U.S. Treasury Money Fund, and the Vanguard S&P 500 ETF. This yield provides a steady income stream, which is beneficial for risk-averse investors seeking stable returns. However, compared to high-dividend benchmarks, this yield is moderate. To enhance income, consider adding dividend-focused funds or stocks with a history of consistent payouts. This can increase the portfolio's yield without significantly altering its risk profile, aligning with the goal of preserving capital while generating income.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.01%

The portfolio benefits from low costs, with the Vanguard S&P 500 ETF having a Total Expense Ratio (TER) of 0.03% and an overall portfolio TER of 0.01%. These low costs support better long-term performance by minimizing the drag on returns. Compared to industry averages, these costs are impressively low, providing a significant advantage. To maintain this cost efficiency, continue prioritizing low-cost funds and consider the impact of fees when making allocation changes. Keeping expenses minimal will help preserve returns over time, especially for a cautious investor focused on capital preservation.

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.

The portfolio's current composition may not be optimized along the Efficient Frontier, which represents the best risk-return trade-off. With a high concentration in large-cap U.S. equities, there's room for improvement in diversification. Adjusting allocations among existing assets could enhance efficiency, but introducing new asset classes or regions may offer more substantial benefits. Consider rebalancing to include a mix of low-correlation assets, which can improve the risk-return ratio. This approach aligns with the goal of achieving optimal performance while maintaining a cautious risk profile.

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