Balanced portfolio with strong US focus and moderate risk aiming for growth and dividends

Report created on Dec 23, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio consists of 50% Vanguard S&P 500 ETF, 30% Schwab U.S. Dividend Equity ETF, 10% Fidelity® Total Bond ETF, and 10% Invesco S&P MidCap Momentum ETF. This composition leans heavily towards equities, particularly large-cap US stocks, with a modest allocation to bonds. Compared to typical balanced portfolios, this setup is more equity-heavy, which can lead to higher returns but also increased volatility. Consider diversifying further by including more asset classes or regions to reduce risk and enhance long-term stability.

Growth Info

Historically, the portfolio achieved a Compound Annual Growth Rate (CAGR) of 12.35%, indicating strong performance. However, it experienced a significant maximum drawdown of -32.09%, reflecting vulnerability during market downturns. Such performance is consistent with a high equity allocation, which can yield impressive returns but also exposes the investor to substantial losses. To mitigate drawdown risk, consider incorporating more stable assets or adjusting equity exposure.

Projection Info

The Monte Carlo simulation, which uses historical data to estimate future outcomes, suggests a 50th percentile return of 307.38% and a 67th percentile of 440.48% over the investment horizon. While 980 out of 1,000 simulations showed positive returns, these projections are not guarantees. They highlight potential outcomes, emphasizing the importance of maintaining a diversified portfolio to buffer against less favorable scenarios.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%
  • Cash
    1%

The portfolio is predominantly composed of stocks (approximately 90%), with a small bond allocation of around 10%. This skew towards equities aligns with a growth-oriented strategy but may lack the stability typically achieved through a more balanced asset mix. For better diversification, consider increasing bond exposure or exploring alternative asset classes like real estate or commodities, which can provide a hedge against equity market volatility.

Sectors Info

  • Technology
    20%
  • Financials
    15%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Consumer Staples
    8%
  • Telecommunications
    6%
  • Energy
    6%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The sector allocation is most concentrated in technology (20%), followed by financial services (15%) and healthcare (10%). While these sectors offer growth potential, they also introduce sector-specific risks. The portfolio's sector diversity is limited, with minimal exposure to utilities and real estate. To enhance resilience against sector downturns, consider redistributing investments to achieve a more balanced sector mix, potentially including underrepresented areas.

Regions Info

  • North America
    89%
  • Europe Developed
    1%

With 89.4% of assets in North America, the portfolio is heavily concentrated in the U.S. market, limiting exposure to international opportunities. While this focus benefits from the stability of the U.S. economy, it may miss growth in emerging markets or developed regions outside North America. To improve geographic diversification, consider increasing allocations to Europe, Asia, or emerging markets, which can reduce regional risk and capture global growth.

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.

Using the Efficient Frontier, the portfolio could potentially be optimized for a better risk-return ratio by adjusting the existing asset allocation. This approach seeks the best possible balance between risk and return, focusing on the current assets. While optimization does not guarantee higher returns, it can help achieve a more efficient portfolio structure, aligning with the investor's risk tolerance and financial goals.

Dividends Info

  • Fidelity® Total Bond ETF 4.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 0.90%
  • Invesco S&P MidCap Momentum ETF 0.20%
  • Weighted yield (per year) 2.04%

With a total dividend yield of 2.04%, the portfolio generates a moderate income stream, primarily from the Schwab U.S. Dividend Equity ETF and Fidelity® Total Bond ETF. This yield supports investors seeking regular income alongside growth. To increase yield, consider reallocating to higher-dividend-paying assets, but be mindful of the trade-off between yield and growth potential.

Ongoing product costs Info

  • Fidelity® Total Bond ETF 0.36%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, which is impressively low and supports better long-term performance by minimizing costs. This cost efficiency aligns with best practices, allowing more of the portfolio's returns to compound over time. Continue to monitor fees, and consider replacing any higher-cost ETFs with lower-cost alternatives to further enhance cost-effectiveness.

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