A balanced portfolio with strong U.S. focus and moderate risk suitable for long-term growth

Report created on Dec 14, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed primarily of three ETFs, with a substantial 60% allocation to the Vanguard S&P 500 ETF. The Schwab U.S. Dividend Equity ETF and the Vanguard Total International Stock Index Fund ETF Shares each hold a 20% allocation. This structure leans heavily towards U.S. equities, offering a mix of growth and dividend-focused investments. A diversified approach is evident, though concentrated in equities. Such a setup is relevant for investors seeking growth through established markets while maintaining exposure to international equities. To enhance balance, consider incorporating other asset classes like bonds to mitigate risk.

Growth Info

Historically, this portfolio has delivered a commendable compound annual growth rate (CAGR) of 12.5%. With an initial investment of $10,000 hypothetically growing to $39,000 over a decade, the performance reflects strong market conditions, particularly in U.S. equities. However, the maximum drawdown of -33.7% indicates vulnerability during market downturns. This historical data provides a snapshot of past trends but does not guarantee future results. Investors should be aware of the potential volatility and prepare for market fluctuations by maintaining a diversified approach.

Projection Info

Using a Monte Carlo simulation, potential future outcomes for this portfolio were projected based on historical data. With 1,000 simulations, the portfolio's annualized return averaged 12.15%, with a median end value of 327.23%. These simulations show a wide range of potential outcomes, with a 5th percentile return of 35.2% and a 67th percentile return of 468.13%. While useful for understanding potential risks and returns, these projections are based on past performance and can't predict future events. Investors should remain flexible and adjust their strategies as market conditions evolve.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.63% in stocks. This concentration in a single asset class suggests limited diversification, which may expose the portfolio to higher volatility. While stocks can offer substantial growth potential, they also come with increased risk compared to a more diversified portfolio that includes bonds or other asset classes. To mitigate risk and enhance stability, consider adding non-equity assets to balance the portfolio, especially for investors with lower risk tolerance.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation in this portfolio shows a significant concentration in technology at 24.55%, followed by financial services and healthcare. This focus on technology aligns with growth trends but may increase exposure to sector-specific risks. Diversifying across sectors can help reduce vulnerability to downturns in any single industry. While the portfolio covers a broad range of sectors, ensuring balanced exposure will help stabilize returns. Consider periodically reviewing sector allocations to maintain alignment with market conditions and personal investment goals.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is predominantly North American, with 81.07% exposure. This strong U.S. focus aligns with the composition of the Vanguard S&P 500 ETF but limits global diversification. While North American markets have historically performed well, geographic diversification can reduce risk by spreading investments across different economic regions. To enhance international exposure, consider increasing allocations to emerging markets and other developed regions. This strategy can provide a buffer against localized economic downturns and capture growth opportunities globally.

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.

Optimization using the Efficient Frontier suggests potential for improving the risk-return ratio within the current asset allocation. By adjusting the weightings among existing assets, the portfolio could achieve a more favorable balance between risk and return. This approach focuses on maximizing returns for a given level of risk, without necessarily increasing diversification. Investors should regularly evaluate their portfolios for optimization opportunities, considering changes in market conditions and personal risk tolerance. Consulting with a financial advisor may provide additional insights into optimization strategies.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 2.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.84%

The portfolio's dividend yield stands at 1.84%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield of 2.6%. Dividends provide a steady income stream, which can be particularly beneficial during periods of market volatility. While the yield is modest, reinvesting dividends can enhance long-term growth through compounding. Investors seeking higher income may consider increasing allocations to dividend-focused funds or individual stocks. Regularly reviewing dividend policies can help ensure alignment with income goals and market conditions.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is 0.05%, indicating low costs relative to industry averages. Keeping costs low is crucial for maximizing net returns, as high fees can erode gains over time. The low-cost structure of this portfolio is a key advantage, allowing more of the investment growth to benefit the investor. Periodically reviewing and comparing fund fees can help maintain this cost advantage. Consider exploring other low-cost investment options if necessary to ensure the portfolio remains competitive.

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