A cautious portfolio with strong U.S. dividend focus and limited international diversification

Report created on Dec 8, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. dividend equities, comprising nearly 44% of the total allocation. Bonds make up about 27%, while real estate represents roughly 10%. There is a small allocation to large-cap growth and S&P 500 ETFs, with a minor portion in Nasdaq equity premium income. This composition suggests a focus on income generation through dividends, balanced by some exposure to growth and fixed income for stability. While this structure can offer steady returns, it also limits diversification. A broader range of asset types could help mitigate risks associated with economic downturns affecting specific sectors or asset classes.

Growth Info

Historically, the portfolio has shown a compound annual growth rate (CAGR) of 8.24%, with a maximum drawdown of 13.49%. This performance indicates a relatively stable growth trajectory, suitable for cautious investors. The portfolio's ability to recover from downturns is crucial, as it reflects resilience against market volatility. However, relying solely on past performance can be misleading due to changing market conditions. Investors should consider diversifying further to enhance resilience. Adding more varied asset classes or sectors could help cushion against future market fluctuations, potentially improving long-term returns.

Projection Info

Forward projections using Monte Carlo simulations indicate an annualized return of 12.27%, with a high probability of positive outcomes. The simulations, which run 1,000 scenarios, show potential portfolio values ranging widely. The 5th percentile suggests a gain of 58.53%, while the 67th percentile projects a 468.51% increase. These projections use historical data to model future performance, but they can't guarantee outcomes due to unpredictable market dynamics. Investors should use these projections as a guide, not a certainty, and consider adjusting their portfolios to align with their risk tolerance and investment goals.

Asset classes Info

  • Stocks
    62%
  • Bonds
    27%
  • Real Estate
    10%
  • No data
    1%

The portfolio's allocation is concentrated in stocks, bonds, and real estate, with stocks making up the majority at 62%. This allocation provides a mix of growth and income, but it may lack the diversification needed to manage risks effectively. Relying heavily on stocks could expose the portfolio to market volatility. Incorporating more diverse asset classes like commodities or international equities might reduce risk and improve returns. A balanced approach that includes a wider variety of assets can better withstand economic shifts, providing a more stable investment experience over time.

Sectors Info

  • Technology
    13%
  • Real Estate
    10%
  • Financials
    10%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Consumer Staples
    6%
  • Industrials
    6%
  • Energy
    6%
  • Telecommunications
    4%
  • Basic Materials
    1%

Sector allocation reveals significant exposure to technology, real estate, and financial services, each above 10%. This concentration poses a risk if these sectors face downturns. While technology and financial services often drive growth, overreliance can lead to volatility. A more balanced sector distribution could enhance stability. Investing in underrepresented sectors like utilities or basic materials might offer counter-cyclical benefits, smoothing out returns during economic turbulence. Diversifying sector exposure ensures the portfolio isn't overly reliant on any single industry's performance, potentially enhancing long-term resilience.

Regions Info

  • North America
    73%

The portfolio is predominantly invested in North America, with over 72% exposure, leaving it vulnerable to regional economic fluctuations. Minimal investments in Europe, Latin America, and Asia suggest limited geographic diversification. This concentration could be a concern if the North American market underperforms. Expanding geographic exposure can help mitigate regional risks and capture growth opportunities in emerging markets. Diversifying across different regions can provide a hedge against local economic downturns, potentially enhancing the portfolio's overall risk-adjusted returns.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    SPDR® Portfolio S&P 500 ETF
    JPMorgan Nasdaq Equity Premium Income ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the Schwab U.S. Large-Cap Growth ETF, SPDR® Portfolio S&P 500 ETF, and JPMorgan Nasdaq Equity Premium Income ETF. These correlations suggest that these assets often move in tandem, which can limit diversification benefits. High correlation increases risk during market downturns, as losses in one asset are likely mirrored by others. Reducing overlap by diversifying into less correlated assets can enhance risk management. Consider reallocating to assets with different market drivers to achieve a more balanced risk profile.

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 can be optimized using the Efficient Frontier to improve the risk-return ratio. This involves reallocating existing assets to achieve the best possible balance of risk and return. Efficiency doesn't necessarily mean adding new assets but rather adjusting current holdings. By focusing on minimizing risk for a given return or maximizing return for a given risk, the portfolio can achieve a more favorable position on the Efficient Frontier. Investors should consider using optimization tools to adjust their asset allocation, enhancing overall portfolio performance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • JPMorgan Nasdaq Equity Premium Income ETF 9.30%
  • Schwab U.S. Dividend Equity ETF 2.50%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Schwab U.S. REIT ETF 1.90%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Weighted yield (per year) 2.74%

The portfolio's dividend yield stands at 2.74%, driven by high-yielding assets like the JPMorgan Nasdaq Equity Premium Income ETF at 9.3%. This yield provides a steady income stream, appealing to income-focused investors. However, high yields can sometimes indicate higher risk, so investors should assess the sustainability of these dividends. Balancing high-yield assets with stable, lower-yielding ones can reduce risk. Regularly reviewing dividend sustainability and adjusting holdings accordingly can help maintain a reliable income stream without compromising portfolio stability.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • JPMorgan Nasdaq Equity Premium Income ETF 0.35%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Schwab U.S. REIT ETF 0.07%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, indicating low costs, which is beneficial for long-term returns. Minimizing fees helps maximize net returns, as high costs can erode gains over time. The Vanguard Total Bond Market Index Fund ETF Shares and SPDR® Portfolio S&P 500 ETF have notably low fees, enhancing cost efficiency. Investors should continue to monitor and manage costs, as even small differences in fees can significantly impact long-term performance. Consider replacing higher-cost assets with similar, lower-cost alternatives to further reduce expenses.

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