A broadly diversified cautious portfolio with a focus on US equities and moderate bond exposure

Report created on Dec 21, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of a mix of equity, bond, and commodity ETFs, with a significant allocation to US equities through the Vanguard Total Stock Market Index Fund ETF Shares at 30%. The portfolio also includes international stocks, bonds, real estate, and commodities. This composition is typical for a cautious investor seeking a balanced approach. Compared to standard benchmarks, the portfolio leans heavily towards US equities, which may limit exposure to global growth opportunities. Consider diversifying further to capture potential gains from other markets.

Growth Info

Historically, the portfolio has posted a Compound Annual Growth Rate (CAGR) of 10.06%, which is robust for a cautious profile. However, it experienced a maximum drawdown of -25.62%, indicating periods of significant value loss. This performance is comparable to many benchmark indices, reflecting a well-balanced risk-return profile. While past performance can provide insights, it's not a guarantee of future results. Maintaining a diversified asset base can help mitigate the impact of future downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a median return of 197.56% over the investment horizon. Although 954 out of 1,000 simulations resulted in positive returns, it's important to remember that these projections are not foolproof. The potential for a range of outcomes highlights the need for ongoing portfolio assessment. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    55%
  • Bonds
    20%
  • Cash
    15%
  • Real Estate
    10%

The portfolio is diversified across four main asset classes: stocks (54.62%), bonds (19.97%), cash (15.39%), and real estate (10%). This allocation provides a balanced exposure to different economic factors. Compared to typical benchmarks, the portfolio has a lower bond allocation, which may reduce income stability. Increasing bond exposure could enhance income predictability and reduce volatility. However, the current mix aligns well with a cautious risk profile, offering a blend of growth potential and income.

Sectors Info

  • Technology
    16%
  • Real Estate
    11%
  • Financials
    8%
  • Consumer Discretionary
    6%
  • Health Care
    6%
  • Industrials
    5%
  • Telecommunications
    5%
  • Consumer Staples
    3%
  • Basic Materials
    2%
  • Energy
    2%
  • Utilities
    1%

Sector allocation is concentrated in technology (15.97%) and real estate (11.38%), with smaller allocations across financial services, consumer cyclicals, and healthcare. This concentration in technology aligns with market trends but may increase volatility during downturns. Compared to benchmarks, the portfolio is underweight in sectors like energy and utilities. To reduce sector-specific risks, consider rebalancing to achieve a more even distribution across sectors, potentially adding exposure to defensive sectors.

Regions Info

  • North America
    51%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographic allocation is heavily weighted towards North America (51.04%), with limited exposure to other regions. This focus on the US market aligns with many investors' preference for familiarity but may miss opportunities in emerging markets. Compared to global benchmarks, the portfolio is underweight in Europe and Asia. Diversifying geographically can help capture growth in different economic environments and reduce regional risk. Consider increasing exposure to underrepresented regions for a more balanced global presence.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio includes highly correlated assets, such as the Vanguard Total Stock Market Index Fund ETF Shares and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can amplify losses. To enhance diversification, consider replacing one of the correlated assets with an investment that has a lower correlation to the rest of the portfolio. This can help manage risk more effectively.

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 current portfolio could be optimized for a better risk-return ratio using the Efficient Frontier concept. This involves adjusting the allocation of existing assets to achieve the best possible return for a given level of risk. The optimized portfolio suggests an expected return of 9.80% with a risk level of 8.25%. While optimization can enhance efficiency, it may not align with all investment goals, such as income generation or capital preservation. Regularly reviewing allocations ensures alignment with personal objectives.

Dividends Info

  • Vanguard Long-Term Bond Index Fund ETF Shares 4.60%
  • Direxion Auspice Broad Commodity Strategy ETF 3.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • WisdomTree Bloomberg U.S. Dollar Bullish Fund 6.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • The Real Estate Select Sector SPDR Fund 2.40%
  • Weighted yield (per year) 2.36%

The portfolio's dividend yield is 2.36%, with contributions from various ETFs, including the WisdomTree Bloomberg U.S. Dollar Bullish Fund at 6.2%. Dividends provide a steady income stream, which is beneficial for cautious investors seeking regular returns. However, the overall yield is modest compared to some income-focused portfolios. To increase income potential, consider adding higher-yielding assets or increasing exposure to dividend-focused funds, while maintaining a balance with growth-oriented investments.

Ongoing product costs Info

  • Vanguard Long-Term Bond Index Fund ETF Shares 0.04%
  • Direxion Auspice Broad Commodity Strategy ETF 0.80%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • WisdomTree Bloomberg U.S. Dollar Bullish Fund 0.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • The Real Estate Select Sector SPDR Fund 0.09%
  • Weighted costs total (per year) 0.21%

The portfolio's total expense ratio (TER) is 0.21%, which is relatively low and supports long-term performance by minimizing costs. The Direxion Auspice Broad Commodity Strategy ETF has the highest expense ratio at 0.8%, which could be a drag on returns. Consider evaluating whether this cost is justified by its performance and diversification benefits. Replacing high-cost assets with lower-cost alternatives can improve net returns without significantly altering the risk profile.

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