A broadly diversified cautious portfolio with a focus on US equities and bonds

Report created on Jan 15, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio's composition reveals a strong emphasis on equities, with 71.6% invested in stocks, primarily through broad market ETFs. Bonds make up 21.7%, providing a stable income stream and reducing overall risk. This balance is typical for cautious investors who seek growth but with a safety net. Compared to common benchmarks, this allocation leans towards equities, which can enhance returns in a bullish market. However, the inclusion of bonds and a small percentage in cash and commodities ensures a diversified approach. To maintain this balance, it is advisable to periodically review asset allocations to align with changing market conditions and personal risk preferences.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 9.64%. This indicates robust growth over time, outperforming many fixed-income benchmarks. However, it experienced a maximum drawdown of -22.06%, highlighting potential volatility. Such drawdowns are typical in equity-heavy portfolios and underscore the importance of diversification. While past performance cannot predict future results, the historical trend suggests resilience and growth potential. To mitigate future risks, consider maintaining a diversified asset mix and regularly reviewing the portfolio's alignment with financial goals and risk tolerance.

Projection Info

Using Monte Carlo simulations, the portfolio's forward projection shows a range of potential outcomes based on historical data. With 1,000 simulations, the median (50th percentile) suggests a 141.15% end value, while the 5th percentile indicates a modest 0.73% growth. The simulations highlight the uncertainty inherent in investing, as past data cannot guarantee future performance. The annualized return of 7.18% across simulations suggests a reasonable expectation for future growth. To enhance confidence in these projections, it may be beneficial to adjust allocations based on current economic conditions and personal investment goals.

Asset classes Info

  • Stocks
    72%
  • Bonds
    22%
  • Cash
    3%
  • Other
    3%

The portfolio's allocation across asset classes is well-diversified, with a significant portion in stocks and bonds. This mix aligns with typical cautious investor profiles, balancing growth and income generation. Compared to benchmarks, the portfolio's equity allocation is slightly higher, which can increase growth potential but also risk. The inclusion of commodities and cash adds an extra layer of diversification, protecting against market volatility. To optimize diversification further, consider periodically reassessing the proportion of each asset class to ensure it reflects current market trends and personal financial objectives.

Sectors Info

  • Technology
    21%
  • Real Estate
    14%
  • Financials
    10%
  • Consumer Discretionary
    8%
  • Health Care
    8%
  • Industrials
    7%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%

Sector allocation shows a notable concentration in technology at 20.5%, followed by real estate and financial services. This concentration can drive growth but may also introduce volatility, particularly if interest rates rise. Compared to benchmarks, the portfolio's sector distribution is relatively balanced, providing exposure to various economic cycles. However, the high tech exposure requires monitoring, as sector-specific risks can impact overall performance. To maintain a balanced sector approach, consider diversifying into underrepresented areas, ensuring the portfolio remains resilient to shifts in market dynamics.

Regions Info

  • North America
    70%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic exposure is heavily weighted towards North America at 69.8%, with limited allocations to other regions. This concentration provides stability, given the strength of the US market, but may miss out on growth opportunities in emerging markets. Compared to global benchmarks, the portfolio is underexposed to Europe and Asia, which could diversify risk and enhance returns. To improve geographic diversification, consider increasing allocations to international markets, balancing the potential for growth with the stability offered by developed regions.

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 has room for optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. Currently, an optimized portfolio could yield a higher return of 3.95% with a lower risk level of 1.70%. This suggests potential improvements in asset allocation without increasing risk. However, it's essential to recognize that optimization focuses on historical data and may not account for future market conditions. Regularly reassessing the portfolio's efficiency and making adjustments as needed can help achieve your financial goals while managing risk effectively.

Dividends Info

  • iShares Core Total USD Bond Market ETF 4.10%
  • iShares National Muni Bond ETF 2.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • The Charles Schwab Family of Funds - Schwab Value Advantage Money Fund 4.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.83%

The portfolio's dividend yield stands at 1.83%, contributing to overall returns, especially during periods of market volatility. Dividend-paying assets, like the iShares Core Total USD Bond Market ETF with a 4.1% yield, offer a steady income stream. This is particularly relevant for cautious investors seeking regular income alongside capital appreciation. While dividends provide stability, it's essential to balance them with growth-oriented investments. To optimize income, consider reinvesting dividends or periodically reviewing the portfolio for higher-yielding opportunities that align with your investment goals.

Ongoing product costs Info

  • iShares Core International Aggregate Bond ETF 0.07%
  • iShares Gold Trust 0.25%
  • iShares Core Total USD Bond Market ETF 0.06%
  • iShares National Muni Bond ETF 0.05%
  • Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF 0.59%
  • Invesco NASDAQ 100 ETF 0.15%
  • 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) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. Low fees are crucial for compounding returns over time, especially in a cautious investment strategy. Compared to industry averages, the portfolio's costs are well-managed, enhancing net returns. To maintain cost efficiency, regularly review the expense ratios of your holdings and consider replacing high-fee assets with lower-cost alternatives, ensuring that the portfolio remains aligned with your financial objectives.

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