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A cautious portfolio with moderate diversification and a focus on dividend income

Report created on Apr 17, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of stocks, accounting for 75% of the holdings, with the remainder in bonds, cash, and unknown asset types. This composition leans towards equities, which typically offer growth potential but come with higher risk. Compared to a benchmark, the portfolio's allocation suggests a moderate risk profile, suitable for cautious investors. To align more closely with conservative benchmarks, consider increasing bond exposure to provide stability and reduce volatility.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 6.29%, with a maximum drawdown of -16.55%. This indicates a moderate level of risk and return, aligning with the cautious profile. A hypothetical $10,000 investment would have grown to approximately $17,000 over 10 years. While past performance is not indicative of future results, maintaining a balanced risk-reward profile is crucial for long-term success.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest an annualized return of 7.10%. With 1,000 simulations, 784 resulted in positive returns, highlighting a favorable outlook. However, the 5th percentile indicates a potential loss of -52.7%, emphasizing the importance of risk management. While projections offer valuable insights, they are not guarantees, and investors should remain vigilant about market changes.

Asset classes Info

  • Stocks
    75%
  • No data
    14%
  • Bonds
    10%
  • No data
    1%

The portfolio's asset class allocation shows a strong preference for stocks, with minimal exposure to bonds and other assets. This allocation offers growth potential but may lack the diversification needed to mitigate risks during market downturns. Comparing this to standard benchmarks, a more diversified asset allocation could enhance risk-adjusted returns. Consider incorporating more bonds or alternative assets to balance the risk-reward ratio.

Sectors Info

  • Real Estate
    18%
  • No data
    14%
  • Utilities
    12%
  • Telecommunications
    8%
  • Basic Materials
    8%
  • Consumer Staples
    7%
  • Energy
    6%
  • Consumer Discretionary
    5%
  • Financials
    4%
  • Health Care
    4%
  • Industrials
    3%
  • Technology
    3%

The portfolio is diversified across several sectors, with a significant focus on real estate, utilities, and communication services. This sectoral allocation provides some balance, but the heavy concentration in real estate could increase sensitivity to sector-specific risks. Compared to common benchmarks, a more evenly distributed sector allocation could enhance diversification and reduce volatility, especially during market fluctuations.

Regions Info

  • North America
    67%
  • No data
    16%
  • Europe Developed
    4%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America, accounting for 67% of the holdings. This concentration could expose the portfolio to regional economic risks. While the focus on a stable region like North America aligns with a cautious profile, adding more international exposure, particularly in developed and emerging markets, could improve diversification and reduce potential regional risks.

Market capitalization Info

  • Large-cap
    60%
  • No data
    14%
  • Mega-cap
    9%
  • Mid-cap
    5%
  • Small-cap
    1%

The portfolio is predominantly invested in large-cap stocks, representing 60% of the holdings. This focus on big companies typically offers stability and steady returns, which aligns with a cautious investment strategy. However, the limited exposure to small and mid-cap stocks may restrict growth potential. To enhance diversification, consider introducing more mid and small-cap stocks, which can offer higher growth opportunities.

Redundant positions Info

  • Schwab Intermediate-Term U.S. Treasury ETF
    Vanguard Intermediate-Term Bond Index Fund ETF Shares
    High correlation
  • Schwab U.S. Dividend Equity ETF
    Vanguard High Dividend Yield Index Fund ETF Shares
    High correlation

Asset correlation analysis reveals that some assets in the portfolio, such as the Schwab Intermediate-Term U.S. Treasury ETF and the Vanguard Intermediate-Term Bond Index Fund ETF Shares, are highly correlated. This correlation may limit diversification benefits, especially during market downturns. To optimize risk management, consider reducing exposure to highly correlated assets and introducing more uncorrelated investments.

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.

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The portfolio can be optimized using the Efficient Frontier, aiming for the best risk-return ratio with current assets. Removing overlapping, highly correlated assets could enhance diversification and risk management. The optimal portfolio suggests a higher expected return of 3.96% with a lower risk level, emphasizing the importance of efficient allocation adjustments to achieve better performance without increasing risk.

Dividends Info

  • Brookfield Infrastructure Partners LP 4.30%
  • Vanguard Intermediate-Term Bond Index Fund ETF Shares 3.20%
  • ConocoPhillips 3.10%
  • Dow Inc 10.20%
  • Duke Energy Corporation 3.50%
  • Ford Motor Company 8.00%
  • JPMorgan Equity Premium Income ETF 8.10%
  • The Coca-Cola Company 2.70%
  • Realty Income Corp 5.50%
  • Schwab U.S. Dividend Equity ETF 4.10%
  • Schwab Intermediate-Term U.S. Treasury ETF 2.20%
  • Schwab International Dividend Equity ETF 4.20%
  • Fidelity® Government Money Market Fund 4.60%
  • AT&T Inc 3.10%
  • Vanguard High Dividend Yield Index Fund ETF Shares 3.10%
  • Welltower Inc 1.80%
  • Weighted yield (per year) 4.56%

The portfolio's dividend yield of 4.56% is attractive, providing a steady income stream. High-yielding assets like Dow Inc and JPMorgan Equity Premium Income ETF contribute significantly to this yield. For cautious investors, dividend income can offer stability and reduce reliance on capital gains. However, it's essential to ensure that dividend-focused investments align with long-term growth objectives.

Ongoing product costs Info

  • Vanguard Intermediate-Term Bond Index Fund ETF Shares 0.04%
  • JPMorgan Equity Premium Income ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab Intermediate-Term U.S. Treasury ETF 0.03%
  • Schwab International Dividend Equity ETF 0.14%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) of 0.04% is impressively low, supporting better long-term performance by minimizing costs. Low costs are crucial for maximizing returns, especially in a cautious portfolio where every percentage point matters. Maintaining a focus on cost-efficient investments, such as low-cost ETFs, can enhance overall returns and align with best investment practices.

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