A cautious portfolio with strong diversification and a focus on stable returns

Report created on Dec 23, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of 45% in a broad US stock market ETF, 20% in an international stock ETF, and 10% each in commodities, real estate, and a US dollar fund. The remaining 5% is in short-term treasury bonds. Such a composition aligns with a cautious investment approach, offering a balanced exposure to equities, real estate, and fixed income. Compared to typical benchmarks, this portfolio is well-diversified, reducing risk through exposure to multiple asset types.

Growth Info

Historically, this portfolio has delivered a solid CAGR of 12.23%, with a maximum drawdown of -19.69%. This indicates good performance with moderate risk, as the drawdown is within acceptable limits for a cautious investor. Compared to benchmarks, this performance suggests a robust strategy. However, it's important to remember that past performance doesn't guarantee future results, so maintaining a diversified approach is key.

Projection Info

Using a Monte Carlo simulation, the portfolio's future performance was projected. This method uses historical data to estimate potential outcomes, indicating a 50th percentile return of 224.25%. While the simulation shows a high probability of positive returns, it's crucial to note that these projections are not guarantees. Therefore, regular reviews and adjustments based on changing market conditions are advisable to maintain alignment with goals.

Asset classes Info

  • Stocks
    64%
  • Cash
    15%
  • Bonds
    10%
  • Real Estate
    10%

The portfolio's allocation includes 64.5% in stocks, 15.5% in cash, 10% in bonds, and 10% in real estate. This allocation is well-balanced, aligning closely with diversification best practices. While the stock allocation is substantial, the inclusion of bonds and cash provides stability and liquidity, which is beneficial for cautious investors. Comparing to benchmarks, this allocation supports a conservative strategy aimed at steady growth and income generation.

Sectors Info

  • Technology
    16%
  • Real Estate
    12%
  • Financials
    10%
  • Industrials
    7%
  • Health Care
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%

Sector-wise, the portfolio is diversified across technology, real estate, financial services, and others, with technology having the highest allocation at 16.48%. This diversity helps mitigate sector-specific risks, although the tech-heavy allocation may introduce volatility during interest rate changes. Matching sector allocations to benchmarks can enhance stability, so regularly reviewing sector performance and adjusting weights can optimize returns.

Regions Info

  • North America
    56%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is primarily exposed to North America (56.39%), with smaller allocations in Europe, Asia, and other regions. This distribution aligns with a cautious approach, focusing on stable, developed markets. However, underexposure to emerging markets could limit growth potential. To enhance diversification, gradually increasing exposure to emerging regions could capture higher growth opportunities without significantly increasing risk.

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 be optimized along the Efficient Frontier, potentially increasing returns without raising risk. Currently, the optimal portfolio suggests an expected return of 2.80% at a risk level of 0.28%. This indicates room for improvement in risk-return balance. Adjusting the allocation between existing assets could enhance efficiency, but it's essential to align any changes with personal risk tolerance and investment goals.

Dividends Info

  • Direxion Auspice Broad Commodity Strategy ETF 3.30%
  • iShares® 0-3 Month Treasury Bond ETF 5.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • The Real Estate Select Sector SPDR Fund 2.40%
  • Weighted yield (per year) 1.55%

With a total yield of 1.55%, dividends contribute moderately to the portfolio's returns. This is typical for a cautious portfolio, providing a steady income stream. Dividend-paying assets can offer some downside protection in volatile markets, making them valuable for investors seeking income stability. Regularly reviewing dividend yields and reinvesting them can enhance compounding effects, supporting long-term growth.

Ongoing product costs Info

  • Direxion Auspice Broad Commodity Strategy ETF 0.80%
  • iShares® 0-3 Month Treasury Bond ETF 0.07%
  • WisdomTree Bloomberg U.S. Dollar Bullish Fund 0.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • The Real Estate Select Sector SPDR Fund 0.09%
  • Weighted costs total (per year) 0.17%

The total expense ratio (TER) of this portfolio is 0.17%, which is impressively low. Minimizing costs is crucial for long-term performance, as high fees can erode returns. The low TER here supports efficient compounding over time. It's advisable to periodically review and compare fund fees to ensure they remain competitive, potentially replacing higher-cost assets with lower-cost alternatives to maintain this advantage.

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