A balanced portfolio with strong US focus and moderate diversification across sectors

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equity ETFs and funds, with a 99.5% allocation to stocks. This composition is typical for a balanced profile, aiming to capture market growth while maintaining a moderate risk level. However, it lacks significant exposure to other asset classes like bonds, which could provide stability during market downturns. To enhance diversification and reduce volatility, consider introducing fixed-income securities or alternative investments. This would align more closely with a truly balanced benchmark, which often includes a mix of stocks and bonds.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 13.63%, reflecting strong equity market performance. However, it experienced a significant maximum drawdown of -33.89%, indicating vulnerability to market downturns. Compared to benchmarks, this performance is impressive but underscores the high-risk nature of a stock-heavy portfolio. While past performance is no guarantee of future results, it highlights the potential for substantial returns, albeit with notable volatility. Regularly reviewing and rebalancing can help mitigate drawdown risks and maintain desired performance levels.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, with an annualized return of 15.0%. This method uses historical data to simulate future scenarios, providing a probabilistic insight into performance. The 5th percentile shows a potential gain of 64.72%, while the 67th percentile indicates a more optimistic 711.25% return. While these projections offer valuable guidance, they are not definitive predictions. It's essential to remember that market conditions can change, and diversification is key to managing uncertainty and achieving consistent returns.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is almost entirely in stocks, with minimal cash and other asset classes. This concentration in equities suggests a strong growth focus but limits the potential for risk mitigation through asset class diversification. A well-diversified portfolio typically includes a mix of stocks, bonds, and possibly other assets like real estate or commodities. Introducing more asset classes could help balance risk and return, aligning with the portfolio's balanced risk classification and enhancing overall stability.

Sectors Info

  • Technology
    33%
  • Financials
    14%
  • Health Care
    10%
  • Industrials
    9%
  • Consumer Discretionary
    8%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Consumer Discretionary
    2%

Sector allocation is diverse, with a notable concentration in technology at 33.04%. This tech-heavy focus could lead to higher volatility, especially during periods of interest rate hikes or regulatory changes. Other sectors like financial services and healthcare provide some balance, but the portfolio could benefit from further diversification. Aligning sector weights more closely with benchmarks can help mitigate sector-specific risks and enhance stability. Regularly reviewing sector trends and adjusting allocations can optimize performance and manage risk effectively.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%

The portfolio's geographic exposure is heavily skewed towards North America, with 90.44% of assets allocated there. This concentration may limit diversification benefits and expose the portfolio to regional economic risks. While the US market offers growth opportunities, introducing more international exposure can help balance potential risks and capture growth from other regions. Consider gradually increasing allocations to underrepresented areas like Europe, Asia, or emerging markets to enhance geographic diversification and reduce reliance on the US economy.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly among US equity funds like the Fidelity 500 Index Fund and Vanguard Total Stock Market Index Fund ETF Shares. This high correlation limits diversification benefits and could lead to synchronized losses during market downturns. Diversification is more effective when assets are less correlated, as they tend to perform differently under various market conditions. Consider replacing some of these overlapping assets with alternatives that offer lower correlation to enhance diversification and reduce overall portfolio 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 could be optimized using the Efficient Frontier, focusing on the best possible risk-return ratio. However, before optimizing, it's advisable to address the high correlation among assets, which limits diversification benefits. Efficient Frontier optimization involves adjusting asset weights to achieve the highest expected return for a given risk level. This process can help identify the most efficient allocation of current assets, enhancing overall performance. Regularly reviewing and rebalancing the portfolio ensures it remains aligned with optimal risk-return dynamics.

Dividends Info

  • Fidelity 500 Index Fund 1.20%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.77%

The portfolio has a total dividend yield of 1.77%, with contributions from various funds. The Schwab U.S. Dividend Equity ETF provides the highest yield at 3.6%, enhancing income potential. Dividend income can be a valuable component of total returns, especially in volatile markets. However, the focus remains on growth rather than income. For investors seeking higher income, consider increasing allocations to higher-yielding assets. Balancing growth and income can provide a more stable return profile and align with diverse investment goals.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This efficient cost structure supports better long-term performance by minimizing the drag on returns. Low fees are a significant advantage, especially in a market where costs can erode gains over time. Maintaining this cost efficiency is crucial for optimizing returns. Regularly reviewing and comparing fund fees ensures continued cost-effectiveness. If possible, consider further reducing costs by exploring similar, lower-fee alternatives without compromising portfolio objectives.

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