A balanced portfolio with strong U.S. focus and limited global diversification

Report created on Mar 7, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. equities, with significant allocations in major ETFs like the Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund. These two alone account for over half of the portfolio. This composition aligns with a typical U.S.-centric investment approach, focusing on broad market exposure. While this provides stability and growth potential, it limits diversification. A more diversified portfolio might include a broader range of asset classes, such as international equities or bonds, to mitigate risks specific to the U.S. market.

Growth Info

Historically, the portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 14.04%. This suggests robust growth, outperforming many benchmarks. However, a maximum drawdown of -31.23% indicates notable volatility, which could affect investors during downturns. While past performance is not indicative of future results, understanding these trends helps set realistic expectations. To manage volatility, consider balancing with more stable assets or diversifying across different markets.

Projection Info

Using Monte Carlo simulations, which model potential future outcomes based on historical data, the portfolio shows promising projections. The median scenario suggests significant growth, with the portfolio potentially increasing by 799.4%. However, simulations also highlight risks, with a 5th percentile outcome of just 75.1% growth. These projections underscore the importance of diversification and risk management, as future market conditions can vary widely. It's wise to periodically review asset allocations to align with changing market dynamics and personal goals.

Asset classes Info

  • Stocks
    90%

The portfolio is predominantly composed of stocks, accounting for 90% of the allocation, with negligible cash holdings. This stock-heavy allocation can drive growth but also introduces higher volatility. Compared to diversified benchmarks, which often include bonds or alternative assets, this portfolio may lack balance. Incorporating other asset classes could enhance stability and reduce risk, especially during equity market downturns. Consider adding fixed-income securities or other non-correlated assets to improve diversification.

Sectors Info

  • Technology
    25%
  • Telecommunications
    17%
  • Financials
    11%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    6%
  • Consumer Staples
    5%
  • Energy
    4%
  • Utilities
    2%
  • Real Estate
    1%
  • Basic Materials
    1%

Sector allocation is skewed towards technology and communication services, making up 42% of the portfolio. This concentration can lead to higher returns during tech booms but also increased volatility, especially with interest rate fluctuations. While sectors like healthcare and financial services provide some balance, the portfolio could benefit from further diversification across underrepresented sectors. Expanding exposure to sectors like utilities or consumer staples might offer stability and reduce sector-specific risks.

Regions Info

  • North America
    88%
  • Asia Emerging
    2%

With 88% of assets in North America, the portfolio is heavily U.S.-centric, offering limited geographic diversification. This focus can lead to vulnerability if the U.S. market underperforms. Expanding into international markets, particularly emerging ones, could provide growth opportunities and reduce reliance on the U.S. economy. Consider increasing allocations to regions like Asia or Europe to enhance global exposure and mitigate geographic risks.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    31%
  • Mid-cap
    16%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio features a mix of market capitalizations, with a strong emphasis on mega and big-cap stocks, totaling 72%. This focus offers stability and liquidity but may limit growth potential compared to small or micro-cap stocks. While large-cap stocks provide reliability, incorporating more small-cap or growth-oriented stocks can enhance returns. Balancing market capitalization exposure can help capture opportunities across different economic cycles and market conditions.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly among the S&P 500-related ETFs. This correlation suggests limited diversification benefits, as these assets tend to move together. In downturns, this could magnify losses. Reducing overlap and adding less correlated assets can improve risk-adjusted returns. Consider diversifying with assets that have historically shown low correlation with U.S. equities, such as international stocks or alternative 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.

The portfolio can be optimized using the Efficient Frontier, focusing on achieving the best risk-return ratio with current assets. However, the presence of highly correlated assets suggests room for improvement. By reducing overlap and adjusting allocations, the portfolio could better align with the Efficient Frontier. This optimization aims to maximize returns for a given level of risk, not necessarily increasing diversification. Regular reviews and adjustments can ensure continued alignment with investment goals.

Dividends Info

  • Fidelity Govt Cash Rsrvs 4.00%
  • Alphabet Inc Class C 0.30%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • Taiwan Semiconductor Manufacturing 1.30%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.73%

The portfolio's dividend yield stands at 1.73%, with contributions from various ETFs and stocks. Dividends provide a steady income stream, appealing to income-focused investors. However, the yield is moderate, reflecting the growth-oriented nature of the portfolio. To enhance income, consider increasing allocations to high-dividend sectors or funds. Balancing growth and income can support long-term wealth accumulation while providing regular cash flow.

Ongoing product costs Info

  • Fidelity Govt Cash Rsrvs 0.26%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, thanks to cost-effective ETFs like the Vanguard and Schwab offerings. Low costs are crucial for maximizing net returns over time, as they reduce the drag on performance. This cost efficiency aligns well with best practices in portfolio management. Maintaining this low-cost structure while exploring diversification opportunities can enhance long-term returns without sacrificing efficiency.

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