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Balanced portfolio with strong US focus and moderate dividend yield potential

Report created on Aug 11, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification
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Positions

This portfolio comprises four ETFs, with the Vanguard Total Stock Market Index Fund making up 40% of the total. The Schwab U.S. Dividend Equity, Schwab International Equity, and Schwab U.S. Large-Cap Growth ETFs each hold 20%. This composition suggests a strong emphasis on equities, particularly within the U.S. market. The portfolio is moderately diversified, indicating a balance between growth and income. Understanding how these allocations impact risk and return is crucial for aligning with investment goals. Consider reviewing the weightings to ensure they match your risk tolerance and objectives.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 13.48%, demonstrating robust performance. However, it also experienced a maximum drawdown of -33.7%, indicating significant volatility during downturns. This performance suggests that while the portfolio has delivered strong returns, it is subject to considerable fluctuations. Past performance is not indicative of future results, but it provides insight into how the portfolio might react to market conditions. Regularly reviewing the portfolio's performance against your financial goals can help manage expectations and adjust strategies as needed.

Projection Info

Using Monte Carlo simulations, future outcomes for this portfolio were projected based on historical data. This method involves running thousands of simulations to estimate potential returns and risks. The median projection suggests a 455.01% increase, while the 5th percentile indicates a more conservative 90.11% growth. Such projections help assess the range of possible outcomes, although they are not guarantees. They rely on past data, which may not fully capture future market dynamics. It's important to use these projections as a guide, not a definitive forecast, and to remain flexible in your investment strategy.

Asset classes Info

  • Stocks
    100%

With nearly 100% allocated to stocks, this portfolio is heavily weighted towards equities, offering potential for high returns but also increased volatility. A minimal allocation to cash, bonds, and other assets limits diversification benefits. This concentration can lead to significant swings in value based on market performance. Diversifying across different asset classes, such as bonds or real estate, could reduce risk and enhance stability. Balancing the portfolio with a mix of asset classes aligned to your risk tolerance can help achieve a more stable return profile over time.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio's sector allocation is led by technology at 26.22%, followed by financial services and healthcare. This concentration in a few key sectors can lead to heightened exposure to sector-specific risks. While these sectors have historically driven growth, they can also be volatile. Ensuring a balanced exposure across various sectors can mitigate these risks. Consider diversifying into underrepresented sectors to reduce potential volatility and enhance the portfolio's resilience to sector-specific downturns.

Regions Info

  • North America
    82%
  • Europe Developed
    11%
  • Japan
    4%
  • Australasia
    1%
  • Asia Developed
    1%

Geographically, the portfolio is predominantly focused on North America, with 81.74% exposure. This concentration limits diversification and increases vulnerability to region-specific economic shifts. While the U.S. market has been a strong performer, expanding geographic exposure could help mitigate regional risks and capture growth opportunities in other markets. Consider increasing allocations to emerging markets or other developed regions to enhance diversification and potentially boost returns.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio's assets show high correlation, particularly between the Vanguard Total Stock Market Index Fund and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move in the same direction, which can reduce diversification benefits. Diversification aims to spread risk by including assets that react differently to market events. Consider replacing highly correlated assets with those that have lower correlation to improve risk management and enhance the portfolio's 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.

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The portfolio's current allocation can be optimized using the Efficient Frontier, which helps identify the best risk-return ratio. This involves adjusting the weightings of existing assets to maximize returns for a given level of risk. Before optimizing, consider removing highly correlated assets that don't contribute to diversification. This approach focuses on improving efficiency rather than diversification alone. By fine-tuning asset allocations, you can potentially achieve a more optimized portfolio that aligns with your risk tolerance and return expectations.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 2.60%
  • Schwab International Equity ETF 1.90%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.44%

The portfolio provides a total dividend yield of 1.44%, with the Schwab U.S. Dividend Equity ETF offering the highest yield at 2.6%. Dividends contribute to total returns and can provide a steady income stream, especially in volatile markets. While the yield is moderate, focusing on dividend growth and reinvestment can enhance long-term returns. Regularly review dividend-paying assets to ensure they align with your income needs and reinvestment strategy, potentially increasing the yield over time.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is a low 0.04%, indicating cost efficiency. Lower costs can significantly enhance long-term returns by reducing the drag on performance. Monitoring and managing investment costs is vital for optimizing returns. Consider regularly reviewing the expense ratios of your holdings and exploring lower-cost alternatives if available. Keeping costs low while ensuring the portfolio meets your investment objectives can improve net returns over time.

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