This portfolio has only about 10 years of historical data, based on the youngest asset in the portfolio. Some metrics, projections, and AI insights may be less reliable and should be interpreted with caution.

Balanced Portfolio with Low Diversity and High US Exposure

Report created on Jul 24, 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 composed of two main ETFs: SPDR S&P 500 ETF Trust at 70% and Schwab U.S. Dividend Equity ETF at 30%. This composition indicates a strong focus on large-cap U.S. equities. While this concentration can provide stability and growth potential, it also introduces a lack of diversification. Diversification is crucial because it spreads risk across different investments, reducing the impact of poor performance in any single asset. To enhance diversification, consider adding assets from different classes like bonds or international equities.

Growth Info

Historically, the portfolio has shown a commendable Compound Annual Growth Rate (CAGR) of 12.37%, though it experienced a maximum drawdown of -33.46%. This performance suggests that while the portfolio has the potential for significant returns, it also carries a risk of substantial short-term losses. Understanding the historical performance helps set realistic expectations and prepare for market volatility. To mitigate the impact of such drawdowns, consider incorporating assets with lower volatility, such as bonds or defensive stocks.

Projection Info

Using a Monte Carlo simulation, which runs numerous scenarios to project future performance, the portfolio showed a median outcome of 412.91% over the investment horizon. The 5th percentile outcome was 74.33%, and the 67th percentile was 590.71%. This wide range of outcomes illustrates the inherent uncertainty in the market. Monte Carlo simulations are valuable as they provide a probabilistic view of future returns. To better manage this uncertainty, consider rebalancing the portfolio periodically to maintain the desired risk level.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.91% in equities and a negligible amount in cash. This allocation suggests a high-risk, high-reward strategy. While equities can offer substantial growth, they are also more volatile. To balance risk and reward, it's advisable to include other asset classes like bonds, which can provide stability and income during market downturns. A more diversified asset allocation can help achieve a smoother return profile over time.

Sectors Info

  • Technology
    24%
  • Financials
    14%
  • Health Care
    13%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Consumer Staples
    9%
  • Telecommunications
    8%
  • Energy
    7%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is diverse, with significant investments in Technology (23.71%), Financial Services (14.01%), and Healthcare (13.12%). However, the portfolio lacks exposure to smaller sectors like Utilities and Real Estate. Sector diversification can help mitigate risks associated with specific industries. For example, if the technology sector underperforms, other sectors might still perform well. To enhance sector diversification, consider adding ETFs or funds that target underrepresented sectors.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America (99.39%), with minimal exposure to Europe, Asia, and Latin America. This heavy U.S. focus means the portfolio is highly susceptible to U.S. market risks. Geographic diversification can reduce this risk by spreading investments across different economic regions. To achieve a more balanced geographic allocation, consider adding international equities or global funds.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.50%
  • SPDR S&P 500 ETF Trust 1.20%
  • Weighted yield (per year) 1.89%

The portfolio includes the Schwab U.S. Dividend Equity ETF, which focuses on dividend-paying stocks. Dividend-paying stocks can provide a steady income stream and potentially reduce overall portfolio volatility. Reinvesting dividends can also enhance long-term growth through compounding. To maximize the benefit of dividends, consider setting up an automatic dividend reinvestment plan (DRIP), which can help grow the investment faster without additional capital outlay.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • SPDR S&P 500 ETF Trust 0.10%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of the portfolio is 0.09%, which is quite low. Lower costs are beneficial as they leave more money invested to grow over time. High fees can significantly erode returns, especially over long investment horizons. Maintaining a low-cost portfolio is a good strategy to maximize net returns. Regularly reviewing and comparing expense ratios of different funds can help keep investment costs low and improve overall performance.

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