A balanced portfolio with a strong focus on U.S. equities and moderate dividend yield

Report created on Jan 21, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. equities, with a significant 67.93% allocated to the Vanguard S&P 500 ETF. This dominance provides exposure to large-cap U.S. stocks, which are considered relatively stable. The inclusion of the Vanguard Small-Cap Index Fund ETF and Schwab U.S. Dividend Equity ETF adds diversification through small-cap and dividend-paying stocks. The Vanguard Total International Stock Index Fund ETF offers some international exposure, though it remains limited. Compared to a typical balanced benchmark, this portfolio leans more heavily on U.S. equities, which could be beneficial in a strong U.S. market but may limit global diversification. Consider increasing international exposure to enhance diversification.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 13.01%, which outpaces many market benchmarks. However, it has also experienced a significant maximum drawdown of -35.01%, indicating potential vulnerability during market downturns. The concentration in U.S. equities, particularly large-cap stocks, has contributed to these strong returns, reflecting the robust performance of the U.S. market in recent years. While past performance is not indicative of future results, maintaining a balanced approach could help mitigate risks. Consider reviewing the allocation to ensure it aligns with your risk tolerance and long-term goals.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows a wide range of potential portfolio values. With 1,000 simulations, the median (50th percentile) return is projected at 276.5%, while the 5th percentile is 18.3%. This indicates a high probability of achieving positive returns, with 974 simulations showing gains. However, the reliance on historical data means these projections are not guaranteed. The portfolio's projected annualized return of 11.52% suggests strong growth potential, but it's crucial to remain mindful of market volatility and adjust allocations as needed to align with evolving financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, which, while offering significant growth potential, also increases exposure to market volatility. This single-asset class approach may limit diversification benefits, as there is no allocation to bonds or other asset classes that could provide stability during market fluctuations. Compared to a typical balanced benchmark, which often includes fixed income, this portfolio is more aggressive. To enhance diversification, consider incorporating other asset classes, such as bonds or real estate, which can help reduce volatility and provide a more balanced risk-return profile.

Sectors Info

  • Technology
    27%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Real Estate
    3%
  • Basic Materials
    3%
  • Utilities
    2%

The portfolio is heavily concentrated in the technology sector, accounting for 27% of the total allocation. This concentration could lead to higher volatility, especially during periods of tech market corrections. Other sectors like financial services, consumer cyclicals, and healthcare each hold significant positions, contributing to diversification. Compared to common benchmarks, this allocation is tech-heavy, which has historically driven strong returns but could pose risks if the sector underperforms. Balancing sector exposure by increasing allocations to underrepresented sectors, such as utilities or real estate, could enhance stability and reduce sector-specific risks.

Regions Info

  • North America
    94%
  • Europe Developed
    3%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

The portfolio's geographic allocation is predominantly North American, with 94% exposure. This heavy reliance on the U.S. market offers familiarity and stability but limits global diversification. Compared to common benchmarks, the portfolio underweights Europe, Asia, and emerging markets, which could provide growth opportunities and reduce regional risk concentration. Expanding geographic exposure by increasing allocations to international and emerging markets could enhance diversification and potentially capture growth in regions with different economic cycles. This approach may help mitigate the risk of overreliance on the U.S. market's performance.

Market capitalization Info

  • Mega-cap
    35%
  • Large-cap
    32%
  • Mid-cap
    21%
  • Small-cap
    10%
  • Micro-cap
    2%

The portfolio's market capitalization distribution is skewed towards mega and big-cap stocks, comprising 67% of the total allocation. This focus on larger companies offers stability and liquidity but may limit exposure to the growth potential of smaller companies. Small and micro-cap stocks make up only 12% of the portfolio, which is lower than typical benchmarks. Increasing exposure to small and mid-cap stocks could enhance growth potential and diversification. However, it's essential to balance this with the increased volatility these stocks may bring. Regularly reviewing market cap distribution ensures alignment with risk tolerance and investment goals.

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 be optimized using the Efficient Frontier, which represents the set of portfolios offering the highest expected return for a given level of risk. By adjusting the current asset allocations, you can potentially achieve a better risk-return ratio. This doesn't necessarily mean adding new assets but rather reallocating existing ones to find the optimal balance. While the portfolio's current structure provides a solid foundation, exploring optimization strategies could enhance efficiency. It's essential to regularly reassess allocations to ensure they align with personal risk tolerance and evolving market conditions.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.59%

The portfolio's overall dividend yield is 1.59%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.60%. Dividends provide a steady income stream and can enhance total returns, especially during periods of market volatility. For investors seeking income, the current yield may be modest, but it complements the growth potential of the portfolio's equity holdings. To increase income, consider reallocating to higher-yielding assets or funds. However, it's crucial to balance the pursuit of yield with the potential for increased risk, as higher yields often come with greater volatility.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance. Lower costs mean more of your returns remain in your pocket, contributing to compounding growth over time. This cost efficiency aligns well with best practices for portfolio management. While the current costs are already optimized, it's important to periodically review fees to ensure they remain competitive. Staying vigilant about costs can help maintain or improve the portfolio's performance, especially as market conditions and investment products evolve.

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