Balanced Growth Portfolio with Strong Dividend Focus and Moderate Geographic Diversification

Report created on Nov 25, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is a blend of ETFs and individual stocks, heavily weighted towards U.S. equities. With 30% in Schwab U.S. Dividend Equity ETF and 20% each in WisdomTree U.S. Quality Dividend Growth Fund and Schwab U.S. Large-Cap Growth ETF, it emphasizes dividend growth and large-cap stocks. Realty Income Corp and VICI Properties Inc add a real estate component, each at 10%. The Vanguard International High Dividend Yield Index Fund ETF Shares introduces some international exposure. This composition indicates a focus on income generation through dividends while maintaining growth potential.

Growth Info

Historically, the portfolio has shown a commendable performance with a CAGR of 14.36%. This suggests strong growth potential for a hypothetical investment made initially. However, the maximum drawdown of -37.25% indicates significant volatility, which is not uncommon in growth-oriented portfolios. The fact that 90% of returns are concentrated in just 22 days highlights the importance of staying invested to capture those critical periods. This historical performance underscores the portfolio's capacity for growth, albeit with accompanying risks.

Projection Info

Using a Monte Carlo simulation, which models potential future returns based on historical data, the portfolio's future looks promising. With 1,000 simulations, the median expected growth is 360.6%, while the 67th percentile shows a potential growth of 567.62%. Impressively, 963 out of 1,000 simulations resulted in positive returns, with an annualized return of 14.18%. This suggests a strong likelihood of continued growth, although actual outcomes can vary. The simulation reinforces the portfolio's potential but also highlights the inherent uncertainties in market predictions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks, representing 99.89% of the total allocation. This high equity exposure aligns with a growth-oriented strategy, providing the potential for significant capital appreciation. However, it also introduces higher volatility and risk. A small cash allocation offers minimal liquidity, while other asset classes are negligible. Diversifying into bonds or alternative investments could provide stability and reduce overall risk, especially during market downturns. This concentrated equity focus is suitable for investors with a higher risk tolerance.

Sectors Info

  • Real Estate
    20%
  • Technology
    19%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    8%
  • Industrials
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Telecommunications
    5%
  • Basic Materials
    2%
  • Utilities
    1%

Sector allocation is diverse, with significant exposure to real estate, technology, and financial services. Real estate leads at 20.32%, followed closely by technology at 19.25%. Financial services and healthcare also hold substantial portions. This indicates a balanced approach across various industries, reducing sector-specific risks. However, the high concentration in real estate and technology could lead to increased volatility. Balancing sector allocation further could enhance stability, especially in fluctuating markets. This diverse sector exposure supports growth but should be monitored for potential overconcentration.

Regions Info

  • North America
    91%
  • Europe Developed
    5%
  • Japan
    1%
  • Asia Emerging
    1%
  • Asia
    1%
  • Australasia
    1%

The portfolio's geographic allocation is heavily tilted towards North America, with 90.59% of assets. This reflects a strong home bias, typical for U.S.-based investors. While this focus benefits from the stability and growth potential of the U.S. market, it limits exposure to international opportunities. Europe, Japan, and emerging Asian markets offer minimal diversification. Expanding geographic allocation could mitigate region-specific risks and tap into global growth trends. A broader international presence would enhance diversification and potentially improve risk-adjusted returns.

Redundant positions Info

  • WisdomTree U.S. Quality Dividend Growth Fund
    Schwab U.S. Dividend Equity ETF
    High correlation

Within the portfolio, there are highly correlated assets, particularly between the WisdomTree U.S. Quality Dividend Growth Fund and Schwab U.S. Dividend Equity ETF. This correlation suggests these assets tend to move in tandem, reducing diversification benefits. While both focus on dividend growth, holding both may not provide additional risk mitigation. Identifying and reducing such overlaps can enhance portfolio diversification and potentially improve risk-adjusted returns. Balancing correlated assets with those having low or negative correlations could stabilize performance during 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, it's crucial to address the portfolio's overlapping assets that offer limited diversification benefits. Removing or reducing highly correlated holdings can enhance diversification. For a riskier approach, consider increasing exposure to growth-oriented assets or sectors. Conversely, a more conservative stance could involve allocating more to bonds or stable sectors. Moving along the efficient frontier allows for adjustments in risk and return expectations. Prioritizing diversification and cost management can lead to a well-optimized portfolio.

Dividends Info

  • WisdomTree U.S. Quality Dividend Growth Fund 1.40%
  • Realty Income Corp 5.40%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • VICI Properties Inc 5.20%
  • Vanguard International High Dividend Yield Index Fund ETF Shares 4.50%
  • Weighted yield (per year) 2.89%

The portfolio's dividend yield stands at 2.89%, indicating a focus on income generation alongside growth. Realty Income Corp and VICI Properties Inc contribute significantly to this yield, with 5.4% and 5.2%, respectively. Schwab U.S. Dividend Equity ETF and Vanguard International High Dividend Yield Index Fund ETF Shares also offer attractive yields. This blend of high-yield assets supports a steady income stream, appealing to income-focused investors. Monitoring dividend sustainability and growth potential is crucial to maintaining this income focus and ensuring long-term portfolio viability.

Ongoing product costs Info

  • WisdomTree U.S. Quality Dividend Growth Fund 0.28%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard International High Dividend Yield Index Fund ETF Shares 0.22%
  • Weighted costs total (per year) 0.10%

The portfolio's costs are relatively low, with a total expense ratio (TER) of 0.1%. Schwab U.S. Large-Cap Growth ETF and Schwab U.S. Dividend Equity ETF boast low fees, enhancing cost efficiency. The WisdomTree U.S. Quality Dividend Growth Fund has a slightly higher expense ratio of 0.28%, but it's still reasonable. Keeping costs low is essential for maximizing net returns. Monitoring and minimizing expenses help preserve capital and improve overall performance. This cost-effective structure supports long-term growth and aligns with prudent investment principles.

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