Balanced Portfolio with Strong Diversification and High Growth Potential but Overlapping Assets Could Be Streamlined

Report created on Aug 11, 2024

Risk profile Info

4/7
Balanced
← Less risk More risk →

Diversification profile Info

4/5
Broadly Diversified
← Less diversification More diversification →

Positions

The portfolio is composed of six ETFs, each with a significant allocation, showing a well-balanced distribution. The largest allocations are to Avantis U.S. Small Cap Value, Invesco NASDAQ 100, Vanguard Total Stock Market Index, and Vanguard Total International Stock Index, each at 20%. The iShares MSCI EAFE and Schwab U.S. Dividend Equity ETFs hold smaller positions. This composition indicates a focus on broad market exposure and diversification. A balanced approach is evident, but it could benefit from fine-tuning to reduce overlap and enhance efficiency.

Growth Info

Historically, the portfolio has performed well, with a CAGR of 14.83% and a maximum drawdown of 24.79%. This indicates strong growth potential but also highlights the volatility inherent in equity-heavy portfolios. The portfolio's ability to recover from downturns is crucial for long-term success. While the returns have been impressive, it's important to ensure that the risk taken aligns with investment goals. Monitoring performance and adjusting allocations as needed can help maintain a balance between risk and return.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio projects a range of potential outcomes. The median scenario suggests a 528.74% return, with the 5th percentile at 101.6% and the 67th percentile at 733.08%. This analysis provides a probabilistic view of future performance, emphasizing the importance of diversification and risk management. While the projections are optimistic, it's essential to remain cautious and prepared for market fluctuations. Regularly reviewing and adjusting the portfolio can help stay on track toward financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with over 99% in equities. This allocation suggests a focus on growth, which can lead to higher returns but also increased volatility. While stocks are an essential component of any growth-oriented portfolio, it's important to consider the potential benefits of including other asset classes like bonds to mitigate risk. Diversifying across asset classes can provide stability and reduce the impact of market downturns, ultimately contributing to a more resilient portfolio.

Sectors Info

  • Technology
    22%
  • Financials
    17%
  • Consumer Discretionary
    12%
  • Industrials
    12%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is well-diversified, with technology, financial services, and consumer cyclicals being the most prominent. This spread across multiple sectors helps mitigate sector-specific risks and provides exposure to various economic drivers. However, it's important to ensure that the sector allocation aligns with personal risk tolerance and market outlook. Regularly reviewing sector performance and making adjustments can help maintain a balanced and well-positioned portfolio, ready to capitalize on emerging opportunities.

Regions Info

  • North America
    71%
  • Europe Developed
    15%
  • Japan
    5%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    2%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with significant exposure to Europe and Japan. This geographic spread offers a mix of developed and emerging markets, providing a balance between growth potential and stability. While the current allocation is broadly diversified, it's important to remain vigilant about geopolitical risks and economic shifts that could impact regional performance. Continuously evaluating geographic exposure ensures the portfolio remains aligned with global market trends and opportunities.

Redundant positions Info

  • iShares MSCI EAFE ETF
    Vanguard Total International Stock Index Fund ETF Shares
    High correlation
  • Invesco NASDAQ 100 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

Within the portfolio, some assets are highly correlated, particularly between iShares MSCI EAFE and Vanguard Total International Stock Index, as well as Invesco NASDAQ 100 and Vanguard Total Stock Market Index. High correlation can diminish diversification benefits, leading to increased portfolio risk. It's crucial to identify and address these overlaps to enhance diversification. By reducing correlated holdings, the portfolio can achieve a more balanced risk profile and improve its ability to weather market fluctuations.

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.

Before optimizing the portfolio, it's essential to address the issue of overlapping assets that reduce diversification benefits. Streamlining these holdings can enhance the portfolio's efficiency and risk-adjusted returns. Once this is achieved, the investor can explore the efficient frontier to adjust their risk exposure. Moving along the efficient frontier allows for tailoring the portfolio to be riskier or more conservative, depending on the investor's evolving risk appetite and financial goals. This approach ensures a well-balanced and optimized investment strategy.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • iShares MSCI EAFE ETF 3.00%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.92%

The portfolio's dividend yield stands at 1.92%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.4%. Dividends provide a steady income stream and can be an important component of total returns, especially in volatile markets. While the current yield is moderate, reinvesting dividends can enhance long-term growth. It's important to balance the pursuit of yield with the overall risk-return profile of the portfolio, ensuring that income generation aligns with investment goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares MSCI EAFE ETF 0.33%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • 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) 0.14%

The portfolio's total expense ratio is 0.14%, reflecting a cost-effective approach to investing. Low costs are crucial for maximizing net returns, as high fees can erode gains over time. The choice of ETFs with competitive expense ratios demonstrates a focus on cost efficiency. Continuously monitoring and managing investment costs is essential to ensure that they remain aligned with the portfolio's objectives. Keeping expenses low while maintaining quality investments is a key strategy for long-term success.

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