Balanced portfolio with high diversification and moderate risk suitable for long-term growth

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio consists of a balanced mix of equities, bonds, and real estate, with a strong emphasis on U.S. equities. The SPDR® Portfolio S&P 500 ETF holds the largest share at 45%, reflecting a focus on large-cap U.S. stocks. This structure aligns well with common balanced portfolios that aim for growth with moderate risk. A diversified approach like this can help mitigate risks associated with any single asset class. However, the portfolio could benefit from a slight increase in bond allocation to reduce volatility further, especially if the investor is nearing retirement.

Growth Info

Historically, the portfolio has delivered a commendable Compound Annual Growth Rate (CAGR) of 10.56%, indicating strong performance over time. This figure suggests that the portfolio has outperformed many traditional savings methods. However, it also experienced a significant maximum drawdown of -31.75%, highlighting potential vulnerability during market downturns. While past performance is not a guarantee of future results, understanding these trends helps investors set realistic expectations. To potentially reduce drawdowns, consider increasing the allocation to bonds or other less volatile asset classes.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, suggests a wide range of possible returns. With 1,000 simulations, the median return is projected at 181.39%, with a high probability of positive returns. This analysis provides a probabilistic insight into potential outcomes, supporting decision-making under uncertainty. However, it's important to remember that simulations are based on historical data, which may not predict future market conditions. Regularly reviewing and adjusting the portfolio according to changing market conditions and personal goals can help optimize future performance.

Asset classes Info

  • Stocks
    79%
  • Real Estate
    10%
  • Bonds
    10%
  • Cash
    1%

The portfolio's allocation across asset classes is predominantly equities, accounting for approximately 79.4%. This high equity exposure aligns with growth-oriented strategies but may increase volatility. The inclusion of real estate at 10% and bonds at around 10% provides some diversification, which is crucial for risk management. A more balanced allocation could be achieved by increasing the bond portion, which typically offers more stability and income, especially in uncertain economic times. Consider your risk tolerance and investment horizon when deciding on asset class adjustments.

Sectors Info

  • Technology
    23%
  • Financials
    12%
  • Real Estate
    12%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%

Sector allocation shows a notable concentration in technology at 23.4%, followed by financial services and real estate. This composition is typical for growth-focused portfolios, as technology often drives innovation and returns. However, this concentration may lead to increased volatility, especially during periods of interest rate changes or sector-specific downturns. Balancing sector weights can reduce risk and enhance stability. Consider diversifying further into underrepresented sectors like utilities or consumer defensives to cushion against potential downturns in more volatile sectors.

Regions Info

  • North America
    66%
  • Europe Developed
    8%
  • Asia Emerging
    6%
  • Japan
    3%
  • Asia Developed
    3%
  • Africa/Middle East
    1%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, making up 66.4% of the allocation. This concentration provides familiarity and stability but may limit exposure to growth opportunities in other regions. The portfolio has limited exposure to emerging markets and developed regions outside North America. Increasing geographic diversification can reduce risk associated with regional economic downturns and capture growth in faster-growing economies. Assessing the potential of international markets and adjusting allocations accordingly may enhance global diversification.

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 could potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. This optimization considers how different allocations can achieve the highest expected returns for a given level of risk. While the portfolio is already well-structured, slight adjustments in asset weights could enhance efficiency. Regularly reviewing the portfolio's position on the Efficient Frontier and making necessary adjustments can help maintain optimal performance. Remember, optimization focuses on maximizing returns relative to risk, not diversification.

Dividends Info

  • iShares Core U.S. Aggregate Bond ETF 4.10%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 2.03%

The portfolio's overall dividend yield is 2.03%, which contributes to returns through income generation. This yield is a healthy addition, particularly for investors seeking regular income alongside capital appreciation. Dividends can provide a buffer during market volatility, offering steady returns even when asset prices fluctuate. While the yield is decent, exploring higher-yielding assets or funds could increase income without significantly altering the portfolio's risk profile. Ensure that any changes align with overall investment goals and risk tolerance.

Ongoing product costs Info

  • iShares Core U.S. Aggregate Bond ETF 0.03%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This low-cost structure supports better long-term performance by minimizing the drag on returns. Lower costs mean more of your investment is working for you, enhancing compounding effects over time. While the current costs are favorable, it's always wise to periodically review and compare fees across similar funds to ensure continued efficiency. Consider if there are any opportunities to switch to even lower-cost options without sacrificing performance or diversification.

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