A balanced portfolio with a strong focus on U.S. equities and moderate dividend yield

Report created on Jan 20, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards U.S. equities, with a significant portion allocated to the Fidelity 500 Index Fund (42%) and the Schwab U.S. Dividend Equity ETF (20%). The remaining assets include the Invesco NASDAQ 100 ETF (17%), Vanguard Total Stock Market Index Fund ETF Shares (11%), and Avantis U.S. Small Cap Value ETF (10%). Compared to a typical balanced benchmark, this portfolio is more concentrated in large-cap U.S. stocks. This composition provides exposure to the broader U.S. market but may lack diversification across asset classes and geographies. To enhance diversification, consider adding non-U.S. equities or fixed income assets, which can help mitigate risk and provide a more balanced growth potential.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 15.78%. This impressive growth suggests strong past performance, though it's essential to note that past results do not guarantee future success. The maximum drawdown of -23.47% indicates potential vulnerability during market downturns. Compared to benchmarks, this performance is competitive, but the concentrated exposure may increase volatility. To maintain strong returns while managing risk, consider periodic rebalancing and monitoring of market conditions to adjust allocations as needed.

Projection Info

Using a Monte Carlo simulation, which models potential future outcomes based on historical data, the portfolio's projected annualized return is 17.74%. This technique provides a range of possible outcomes, with the 5th percentile at 159.9% and the 67th percentile at 1,061.3%. While these projections are promising, it's important to remember that they are based on historical trends and assumptions, which may not hold true in the future. As market conditions change, regularly reviewing and adjusting the portfolio can help align it with your goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is composed entirely of stocks, lacking exposure to other asset classes like bonds or real estate. While this focus on equities can drive growth, it also increases volatility and risk. Diversification across asset classes can help smooth returns over time and reduce the impact of market fluctuations. Including fixed income or alternative investments could provide stability and income, making the portfolio more resilient to economic changes. Consider gradually incorporating different asset classes to achieve a more balanced and diversified investment strategy.

Sectors Info

  • Technology
    29%
  • Financials
    14%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Discretionary
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Consumer Discretionary
    5%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The sector allocation shows a concentration in technology (29%), followed by financial services (14%) and healthcare (10%). This sectoral tilt reflects a modern growth-oriented approach but may lead to increased volatility, especially if tech stocks face headwinds. Compared to common benchmarks, this allocation is tech-heavy, which can be advantageous during growth periods but risky during downturns. To mitigate sector-specific risks, consider diversifying into less represented sectors, such as utilities or consumer staples, which can provide stability and income during volatile market conditions.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio is predominantly focused on North America, with 99% exposure, leaving minimal allocation to other regions. This geographic concentration may limit diversification benefits and increase vulnerability to U.S. market-specific risks. Compared to global benchmarks, this portfolio lacks exposure to international markets, which can offer growth opportunities and risk diversification. To enhance geographic diversification, consider adding international equities, including emerging markets, which can provide access to different economic cycles and growth drivers.

Market capitalization Info

  • Large-cap
    37%
  • Mega-cap
    33%
  • Mid-cap
    17%
  • Small-cap
    7%
  • Micro-cap
    5%

The portfolio's market capitalization distribution is skewed towards large-cap stocks, with big and mega-cap companies making up 70% of the allocation. Medium, small, and micro-cap stocks are less represented, which may limit exposure to high-growth opportunities typically found in smaller companies. While large-cap stocks provide stability and are often less volatile, including a broader range of market capitalizations can enhance diversification and growth potential. Consider increasing the allocation to small and mid-cap stocks to capture growth opportunities and balance the risk-return profile.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Fidelity 500 Index Fund
    High correlation

The assets in this portfolio show a high degree of correlation, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and the Fidelity 500 Index Fund. This correlation suggests that these funds move together, which can limit diversification benefits during market downturns. Highly correlated assets may not provide the desired risk reduction, as they tend to react similarly to market changes. To improve diversification, consider replacing one of these funds with an asset that has a lower correlation to the rest of the portfolio, such as international or sector-specific ETFs.

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's current allocation could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This process involves adjusting the weights of existing assets to maximize returns for a given level of risk. However, before optimizing, consider addressing the issue of highly correlated assets, as they may not contribute to diversification. By reducing overlap and focusing on less correlated investments, you can enhance the portfolio's efficiency and potentially improve overall performance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Fidelity 500 Index Fund 1.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.63%

The portfolio offers a moderate dividend yield of 1.63%, with the Schwab U.S. Dividend Equity ETF contributing significantly at 3.60%. Dividends can provide a steady income stream, which is beneficial for investors seeking income alongside capital appreciation. Compared to typical equity portfolios, this yield is competitive, offering a balance between growth and income. To enhance dividend income, consider increasing exposure to high-yield sectors or funds, while maintaining a focus on growth to ensure the portfolio aligns with long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Fidelity 500 Index Fund 0.02%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.07%

The total expense ratio (TER) of the portfolio is 0.07%, which is impressively low. This cost efficiency supports better long-term performance, as lower fees mean more of your investment returns stay in your pocket. Compared to industry averages, these costs are very competitive, providing a strong foundation for cost-effective investing. While the current cost structure is favorable, it's important to periodically review and compare fund fees to ensure they remain competitive and aligned with your investment strategy.

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