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A balanced portfolio with strong US focus and efficient cost management

Report created on Jan 18, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification
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Positions

This portfolio is dominated by funds, with a significant 56% allocation to a target date fund, complemented by a total stock market fund and an S&P 500 fund. The remaining portion includes a money market fund and a small allocation to individual stocks. Such a composition is typical for balanced portfolios, focusing on long-term growth while maintaining some liquidity. However, the reliance on a few funds may limit diversification. Consider broadening the asset base by exploring additional asset classes to enhance diversification and potentially improve risk-adjusted returns.

Growth Info

The portfolio has shown a commendable historical performance with an 11.01% CAGR, although it experienced a maximum drawdown of -29.27%. This indicates strong growth potential but also significant volatility during downturns. Benchmarking against similar portfolios, this performance is competitive. However, past performance is not indicative of future results. To mitigate future risks, consider strategies such as rebalancing or diversifying into less correlated assets to reduce volatility and improve resilience during market fluctuations.

Projection Info

Using Monte Carlo simulations, this portfolio shows a promising range of future outcomes with a median expected growth of 910.46%. Monte Carlo analysis projects potential outcomes by simulating different market conditions based on historical data, but it's important to note that these are hypothetical scenarios. While the optimistic projections are encouraging, they are not guaranteed. To enhance future performance, consider periodic reviews and adjustments to the asset allocation to align with evolving market conditions and personal financial goals.

Asset classes Info

  • Stocks
    80%
  • Bonds
    7%
  • Cash
    1%

The portfolio is heavily weighted towards stocks at nearly 80%, with a modest allocation to bonds and minimal cash holdings. This allocation provides exposure to equity market growth but may increase volatility. A typical balanced portfolio might have a more even distribution between stocks and bonds. Consider increasing bond exposure to reduce risk and provide more stability, especially if nearing retirement or seeking to preserve capital. This adjustment can help achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    23%
  • Financials
    13%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Real Estate
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%

The portfolio's sector allocation is tech-heavy at 22.9%, followed by financial services and consumer cyclical sectors. This concentration aligns with current market trends but may lead to higher volatility, especially during economic shifts. Compared to common benchmarks, the sector diversification is reasonable but could benefit from increased exposure to underrepresented areas like utilities or consumer defensive sectors. Adjusting sector weights can help mitigate risks associated with sector-specific downturns and enhance overall portfolio stability.

Regions Info

  • North America
    71%
  • Europe Developed
    8%
  • Japan
    3%
  • Asia Emerging
    2%
  • Asia Developed
    2%
  • Australasia
    1%

Geographically, the portfolio is concentrated in North America at 71%, with limited exposure to other regions. While this focus benefits from the stability of developed markets, it may miss growth opportunities in emerging markets. Compared to global benchmarks, the geographic diversification is somewhat limited. Consider increasing exposure to international markets to capture diverse economic growth and reduce region-specific risks. A more globally diversified portfolio can enhance resilience against localized economic downturns.

Redundant positions Info

  • Schwab S&P 500 Index Fund
    SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES
    High correlation

The portfolio includes highly correlated funds, particularly the S&P 500 and total stock market funds. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could lead to increased volatility. To improve diversification, consider replacing one of the correlated funds with an asset that behaves differently in various market conditions. This adjustment can help create a more resilient portfolio that better withstands 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.

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The portfolio's current risk-return profile can be optimized using the Efficient Frontier, which suggests an expected return of 33.99% at a similar risk level. The Efficient Frontier identifies the best possible risk-return ratio based on current assets. However, optimization requires aligning asset weights to achieve this efficiency. Consider reallocating assets to improve this ratio, but be aware that achieving optimal returns involves trade-offs and may not align with all investment goals.

Dividends Info

  • Apple Inc 0.40%
  • Alphabet Inc Class A 0.30%
  • 3M Company 2.40%
  • Microsoft Corporation 0.70%
  • Schwab S&P 500 Index Fund 1.20%
  • Schwab Value Advantage Money Fund 4.40%
  • Weighted yield (per year) 0.70%

With a total dividend yield of 0.7%, the portfolio provides modest income, primarily from funds and select stocks like the Schwab Value Advantage Money Fund. Dividend income can offer a steady cash flow, beneficial for reinvestment or income needs. However, the yield is relatively low compared to income-focused portfolios. If income generation is a priority, consider increasing exposure to higher-dividend-paying assets. This can enhance cash flow while maintaining growth potential.

Ongoing product costs Info

  • Schwab S&P 500 Index Fund 0.02%
  • SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES 0.03%
  • SCHWAB TARGET 2045 INDEX FUND INSTITUTIONAL SHARES 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, thanks to cost-efficient index funds. Low costs are crucial for improving net returns over time. Compared to industry averages, this cost efficiency is a strength, allowing more of your investment returns to compound. Continue to monitor expense ratios and seek opportunities to reduce costs further, such as by replacing higher-fee assets with similar, lower-cost alternatives. This can enhance long-term performance.

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