A cautious portfolio with strong bond focus and moderate sector diversification

Report created on Feb 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 composed of 40% bonds, 52% stocks, and 8% real estate, with a focus on ETFs. The bond-heavy allocation reflects a cautious approach, prioritizing stability over aggressive growth. Compared to a typical balanced portfolio, this structure reduces volatility by emphasizing fixed-income assets. This allocation is suitable for investors seeking capital preservation. To enhance diversification, consider adding more asset classes or increasing exposure to existing ones. Aligning the portfolio with a broader benchmark might improve diversification without significantly increasing risk.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 8.63% with a maximum drawdown of -24.37%. While the CAGR indicates solid growth, the drawdown suggests vulnerability during market downturns. Compared to benchmarks, the performance is commendable, especially given the cautious risk profile. However, past performance doesn't guarantee future results. To mitigate potential losses, consider adjusting the asset mix to better withstand market volatility. Maintaining a focus on long-term growth while managing risk remains crucial.

Projection Info

The Monte Carlo simulation, using 1,000 scenarios, projects potential outcomes for the portfolio. The 5th percentile shows a 17.6% return, while the 50th and 67th percentiles indicate 296.1% and 439.9% growth, respectively. The annualized return across simulations is 11.59%. These projections, based on historical data, offer a range of possible future performance but are not guarantees. To enhance the portfolio's resilience, consider diversifying further across asset classes and regions. Regularly reviewing the asset allocation can help adapt to changing market conditions.

Asset classes Info

  • Stocks
    52%
  • Bonds
    40%
  • Real Estate
    8%
  • Cash
    1%

The portfolio allocation includes stocks, bonds, and real estate, with a significant 40% in bonds. This mix provides moderate diversification and aligns with the cautious risk profile. Compared to typical benchmarks, the bond allocation is higher, offering stability but potentially limiting growth. To improve diversification, consider increasing exposure to underrepresented asset classes. This adjustment can help balance risk and return, providing a more robust portfolio that can better withstand market fluctuations.

Sectors Info

  • Technology
    13%
  • Real Estate
    9%
  • Financials
    8%
  • Consumer Discretionary
    6%
  • Health Care
    6%
  • Industrials
    5%
  • Telecommunications
    4%
  • Consumer Staples
    3%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    1%

The portfolio spans multiple sectors, with technology, real estate, and financial services being the most prominent. This sectoral distribution offers moderate diversification. The technology sector's 13% allocation may introduce some volatility, especially during interest rate changes. Compared to benchmarks, the sector weights are relatively balanced. To further diversify, consider adjusting allocations to sectors with lower representation. This can help mitigate sector-specific risks and improve overall portfolio resilience.

Regions Info

  • North America
    51%
  • Europe Developed
    4%
  • Japan
    2%
  • Asia Emerging
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America at 51%, with limited exposure to other regions. This concentration may increase vulnerability to regional economic shifts. Compared to global benchmarks, the international diversification is limited. To enhance geographic diversification, consider increasing allocations to Europe, Asia, and emerging markets. This adjustment can help reduce regional risk and tap into growth opportunities outside North America, potentially improving the portfolio's risk-return profile.

Market capitalization Info

  • Mega-cap
    19%
  • Large-cap
    19%
  • Mid-cap
    15%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio's market capitalization distribution includes 19% mega-cap, 19% big-cap, and 15% medium-cap stocks. This balance provides exposure to established companies, offering stability and potential growth. However, with only 5% in small-cap stocks, the portfolio may miss out on higher growth opportunities typical of smaller companies. To improve diversification and capture potential growth, consider increasing small-cap exposure. This change can enhance the portfolio's risk-return balance, aligning with long-term growth objectives.

Redundant positions Info

  • iShares Core S&P 500 ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets like the iShares Core S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, potentially limiting diversification benefits. During market downturns, this can increase risk. To improve diversification, consider reducing exposure to overlapping assets and adding less correlated investments. This strategy can enhance the portfolio's risk management, providing a more stable performance across different market conditions.

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's current allocation can be optimized using the Efficient Frontier, focusing on the best risk-return ratio. This optimization considers only the existing assets, suggesting allocation shifts to enhance efficiency. While the portfolio is already cautious, further adjustments may improve returns without significantly increasing risk. Consider reallocating within existing asset classes to achieve a more efficient balance. This strategy can enhance the portfolio's performance, aligning with the cautious risk profile and long-term investment goals.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • iShares Core S&P 500 ETF 1.20%
  • iShares Core MSCI Total International Stock ETF 3.10%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.40%
  • The Real Estate Select Sector SPDR Fund 3.30%
  • Weighted yield (per year) 2.69%

The portfolio's dividend yield is 2.69%, with contributions from various ETFs. Dividend income provides a steady cash flow, appealing to conservative investors seeking regular income. Compared to typical market yields, this is competitive, enhancing total returns. However, focusing solely on dividends might limit growth potential. To balance income and growth, consider maintaining a mix of dividend and growth-focused assets. This approach can ensure a stable income stream while pursuing long-term capital appreciation.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • iShares Core S&P 500 ETF 0.03%
  • iShares Core MSCI Total International Stock ETF 0.07%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • The Real Estate Select Sector SPDR Fund 0.09%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, supporting better long-term performance by minimizing costs. This aligns well with best practices for cost management, ensuring more of the portfolio's returns are retained. Compared to typical ETF costs, this is highly efficient. To maintain this advantage, regularly review and compare expense ratios across similar funds. Keeping costs low without compromising on investment quality remains essential for maximizing net returns over time.

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