A broadly diversified portfolio with a balanced risk profile and strong historic performance

Report created on Aug 11, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of four ETFs with a focus on U.S. equities, making up 76% of the total allocation. The remaining 24% is allocated to international stocks. This structure provides a strong foundation in large-cap U.S. equities, complemented by international diversification. Compared to typical benchmarks, this portfolio leans heavily towards U.S. stocks. This composition is well-suited for those seeking broad exposure to the stock market while maintaining a focus on U.S. equities.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 12.79%, outperforming many market benchmarks. However, it experienced a significant maximum drawdown of -33.64%, indicating vulnerability during market downturns. The portfolio's strong historic performance is a positive indicator of its resilience and ability to recover from market volatility. While past performance is not a guarantee of future results, this track record suggests that the portfolio is well-positioned for continued growth.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected with 1,000 simulations. The median outcome suggests a potential growth of 394.9%, with a 5th percentile outcome of 67.0% and a 67th percentile of 558.4%. Monte Carlo analysis provides a range of potential outcomes based on historical data, highlighting the portfolio's growth potential. However, it's important to note that these projections are not predictions and depend heavily on past performance trends, which may not continue.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The asset allocation is heavily skewed towards stocks, with 99% of the portfolio in equities and a mere 1% in cash. This high equity exposure is typical for a growth-focused portfolio, offering significant upside potential. However, it also increases risk, especially during market downturns. For those seeking to balance risk, introducing other asset classes like bonds or real assets could enhance diversification and reduce volatility.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio's sector allocation is notably concentrated in technology, which comprises 27% of the total. Other significant sectors include financial services and consumer cyclicals. This tech-heavy allocation aligns with current market trends but could lead to higher volatility, especially during periods of tech sector downturns. Diversifying into less represented sectors could reduce sector-specific risks and enhance overall stability.

Regions Info

  • North America
    78%
  • Europe Developed
    9%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with 78% exposure. This is complemented by smaller allocations to Europe and Asia. While this focus on North America aligns with benchmark norms, it may limit exposure to growth opportunities in emerging markets. Increasing allocations to underrepresented regions could enhance geographic diversification and reduce dependence on the U.S. market.

Market capitalization Info

  • Mega-cap
    39%
  • Large-cap
    36%
  • Mid-cap
    19%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio is well-diversified across market capitalizations, with a strong emphasis on mega and big-cap stocks, making up 75% of the allocation. This focus on larger companies typically offers stability and lower volatility but may limit exposure to the potential high growth of smaller companies. Introducing more small and micro-cap stocks could provide growth opportunities and improve diversification.

Redundant positions Info

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

There is a high correlation between the Schwab U.S. Large-Cap Growth ETF and the Vanguard Total Stock Market Index Fund ETF Shares, suggesting limited diversification benefits. High correlation means these assets tend to move together, which can increase risk during market downturns. Reducing overlap by replacing one of these ETFs with a less correlated asset could enhance diversification and improve risk management.

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 could benefit from optimization using the Efficient Frontier, focusing on the best possible risk-return ratio. By adjusting allocations among existing assets, investors can potentially achieve a more efficient portfolio. This process doesn't necessarily mean adding new assets but rather fine-tuning current holdings to maximize returns for a given level of risk. Ensuring that the portfolio is aligned with the Efficient Frontier can enhance performance.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 2.00%

The portfolio's overall dividend yield is 2.00%, with significant contributions from the Schwab U.S. Dividend Equity ETF and Vanguard Total International Stock Index Fund ETF Shares. Dividends provide a steady income stream, which can be particularly beneficial during periods of market volatility. For income-focused investors, maintaining or increasing dividend yield can be a strategic priority to enhance returns.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The total expense ratio (TER) of the portfolio is impressively low at 0.05%, thanks to the cost-effective nature of the ETFs included. Low costs are a crucial factor in maximizing long-term returns, as they allow more of the portfolio's gains to be reinvested. This efficient cost structure aligns with best practices and supports the portfolio's overall growth potential, making it a strong component of the investment strategy.

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