Balanced Portfolio with High Dividend Focus and Low Geographic Diversification but Potential for Higher Returns

Report created on Dec 3, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the Invesco S&P 500® High Dividend Low Volatility ETF, making up over 80% of the total. This indicates a strong preference for high dividend and low volatility assets. The remaining positions are spread across several ETFs and a small fraction in common stock, but the overall diversification is low. This composition reflects a strategy focused on generating income through dividends. However, the heavy reliance on a single ETF could expose the portfolio to specific risks associated with that fund. It may be beneficial to consider diversifying further to mitigate potential risks.

Growth Info

Historically, the portfolio has performed quite well with a CAGR of 13.76%, which is impressive. This suggests that the chosen assets have been able to deliver strong returns over time. However, the max drawdown of -13.11% indicates that the portfolio has experienced some volatility. The fact that 90% of returns were generated in just 11 days highlights the importance of timing in this portfolio's performance. While the historical performance is promising, it's crucial to remember that past performance is not always indicative of future results, and diversification could help stabilize returns.

Projection Info

Using a Monte Carlo simulation with a hypothetical initial investment, the forward projection suggests a wide range of potential outcomes. The simulation shows a 5th percentile return of -99.93% and a 50th percentile return of -94.05%, highlighting significant downside risk. However, with an annualized return of 7.63%, there is potential for positive returns. Monte Carlo simulations provide a statistical analysis of potential future performance, emphasizing the uncertainty inherent in investing. To improve the likelihood of achieving desired outcomes, consider strategies to manage risk and increase diversification.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with nearly 100% allocation to this asset class. This high concentration in equities suggests a focus on growth and income through dividends. While stocks can offer substantial returns, they also come with higher risk compared to other asset classes like bonds or cash. A more balanced allocation across different asset classes could help reduce risk and provide more stability. Consider incorporating other asset classes to create a more diversified portfolio that aligns with long-term investment goals and risk tolerance.

Sectors Info

  • Utilities
    18%
  • Consumer Staples
    16%
  • Health Care
    12%
  • Real Estate
    12%
  • Energy
    11%
  • Telecommunications
    9%
  • Technology
    8%
  • Consumer Discretionary
    5%
  • Basic Materials
    5%
  • Industrials
    3%
  • Financials
    3%

The sector allocation is diverse, with significant investments in utilities, consumer defensive, healthcare, and real estate. These sectors are traditionally considered more stable and can provide consistent dividend income. However, the portfolio also includes exposure to technology and energy, which can be more volatile but offer growth potential. The current sector allocation reflects a blend of stability and growth. To optimize sector exposure, consider reviewing the balance between defensive and growth sectors to ensure alignment with investment objectives and risk appetite.

Regions Info

  • North America
    97%
  • Europe Developed
    2%

Geographically, the portfolio is heavily concentrated in North America, accounting for over 97% of the allocation. This lack of geographic diversification could expose the portfolio to regional economic risks. While the U.S. market has been a strong performer, relying too heavily on one region may limit potential opportunities elsewhere. Expanding geographic exposure to include more international markets could enhance diversification and provide access to different economic cycles and growth opportunities. Consider exploring investments in other regions to achieve a more balanced global allocation.

Redundant positions Info

  • Vanguard High Dividend Yield Index Fund ETF Shares
    iShares Core Dividend Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard High Dividend Yield Index Fund ETF Shares and the iShares Core Dividend Growth ETF. High correlation means these assets tend to move in the same direction, reducing the diversification benefits. This could increase the portfolio's risk if these assets perform poorly simultaneously. To enhance diversification, it may be wise to reduce exposure to highly correlated assets and seek investments that offer more independent performance. This strategy can help mitigate risk and improve overall portfolio resilience.

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.

Before optimizing the portfolio, it's essential to address the issue of overlapping assets that provide no diversification benefits. By reducing exposure to highly correlated assets, the portfolio can be made more efficient. Moving along the efficient frontier allows for achieving a riskier or more conservative portfolio. A more efficient portfolio with the same risk level could yield higher returns. Consider the trade-offs between risk and return while making adjustments. Exploring options to enhance diversification and manage risk effectively will contribute to a more balanced and optimized portfolio.

Dividends Info

  • iShares Core Dividend Growth ETF 2.10%
  • Global X SuperDividend U.S. ETF 6.50%
  • Invesco QQQ Trust 0.60%
  • Invesco S&P 500® High Dividend Low Volatility ETF 3.30%
  • Global X Uranium ETF 5.30%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 3.17%

The portfolio's dividend yield is 3.17%, which is relatively attractive for income-focused investors. The Invesco S&P 500® High Dividend Low Volatility ETF and Global X SuperDividend U.S. ETF contribute significantly to this yield. Dividends can provide a steady income stream, which is beneficial for investors seeking regular cash flow. However, relying solely on dividends may limit capital appreciation potential. It's important to balance the desire for income with the need for growth. Consider evaluating the dividend sustainability and growth potential of the portfolio to ensure it meets long-term income and growth objectives.

Ongoing product costs Info

  • iShares Core Dividend Growth ETF 0.08%
  • Global X SuperDividend U.S. ETF 0.45%
  • Invesco QQQ Trust 0.20%
  • Invesco S&P 500® High Dividend Low Volatility ETF 0.30%
  • Global X Uranium ETF 0.69%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.29%

The total expense ratio (TER) for the portfolio is 0.29%, which is relatively low, indicating cost-effective management. Lower costs can enhance net returns over time, making it a crucial factor in portfolio performance. The Vanguard High Dividend Yield Index Fund ETF Shares has the lowest expense ratio, while the Global X Uranium ETF is the most expensive. While the overall costs are reasonable, it's important to continue monitoring them to ensure they remain competitive. Consider periodically reviewing the cost structure and exploring opportunities to minimize expenses without compromising investment quality.

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