A balanced portfolio with strong US focus and moderate diversification across sectors

Report created on Jan 13, 2025

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 heavily weighted towards ETFs, with the Vanguard S&P 500 ETF making up 34% of the allocation. The Avantis U.S. Small Cap Value ETF and Invesco NASDAQ 100 ETF follow, comprising 23% and 18%, respectively. Diversification primarily comes from the Vanguard Total International Stock Index Fund at 17%. While this structure aligns with a balanced profile, it leans significantly towards large-cap US equities. This composition is common among US-focused portfolios, aiming to capture broad market growth. Consider diversifying further by including different asset classes like bonds to enhance stability.

Growth Info

Historically, this portfolio has performed well with a compound annual growth rate (CAGR) of 14.84%. This indicates a strong ability to generate returns over time. However, the maximum drawdown of -23.87% highlights potential vulnerability during market downturns. Compared to benchmarks, these figures suggest robust growth but with notable risk. While past performance is not indicative of future results, it provides a useful context. To mitigate potential drawdowns, consider incorporating assets with lower volatility or exploring strategies that hedge against market declines.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows a median portfolio growth of 485.28% over the long term. This suggests a promising outlook, with 995 out of 1,000 simulations yielding positive returns. However, the 5th percentile outcome of 89.1% underscores the range of potential risks. While useful, these projections are not guarantees, as they rely on historical trends. To better prepare for uncertainties, review your risk tolerance and adjust allocations to balance potential returns with acceptable levels of risk.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for over 99% of the allocation. This high concentration in equities implies a growth-oriented strategy but also exposes the portfolio to stock market volatility. Compared to a typical balanced benchmark, which might include a mix of stocks and bonds, this allocation lacks fixed-income assets that could provide stability. To enhance diversification and reduce risk, consider introducing other asset classes like bonds or real estate, which can offer potential income and lower volatility.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Consumer Discretionary
    12%
  • Industrials
    11%
  • Health Care
    8%
  • Telecommunications
    8%
  • Energy
    6%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is tilted towards technology at nearly 25%, followed by financial services and consumer cyclicals. This mirrors common benchmarks but indicates a potential vulnerability to sector-specific risks, such as tech volatility during interest rate changes. The inclusion of sectors like healthcare and consumer defensive helps balance this risk, offering stability during economic downturns. For a more resilient portfolio, consider increasing exposure to underrepresented sectors like utilities or real estate, which can provide additional diversification benefits.

Regions Info

  • North America
    83%
  • Europe Developed
    7%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily concentrated in North America, with 83% exposure. This focus aligns with its US-centric holdings but limits diversification benefits from global markets. Compared to global benchmarks, there is significant underexposure to regions like Europe and Asia. This concentration may lead to missed opportunities in emerging markets or developed economies outside the US. To improve geographic diversification, consider reallocating a portion of assets to international markets, which may offer growth potential and reduce regional risk.

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's risk-return profile could potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. This involves adjusting current asset allocations to achieve maximum returns for a given level of risk. While the current portfolio is well-structured, exploring optimization can uncover opportunities for improvement. Keep in mind that this process focuses on the existing assets and may not account for broader diversification goals. Regularly review and adjust allocations to ensure alignment with your risk tolerance and investment objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.79%

The portfolio yields an overall dividend of 1.79%, with the Schwab U.S. Dividend Equity ETF contributing a substantial 3.7%. Dividends provide a reliable income stream, which can be particularly appealing during periods of market volatility. While the yield aligns with a balanced approach, it may not be sufficient for income-focused investors. To boost dividend income, consider reallocating towards higher-yielding assets or funds. However, ensure that any changes align with your overall investment strategy and risk tolerance, as higher yields often come with increased risk.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • 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) 0.11%

The portfolio's total expense ratio (TER) is impressively low at 0.11%, with individual fund costs ranging from 0.03% to 0.25%. These low costs are beneficial for long-term performance, as they help retain more of the portfolio's returns. Compared to industry averages, this cost structure is highly efficient, supporting better net returns over time. Maintaining low costs is crucial for optimizing portfolio performance, so continue to monitor fees and consider replacing higher-cost funds with more cost-effective alternatives if they align with your investment goals.

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