A balanced portfolio with strong U.S. focus and moderate diversification across sectors

Report created on Jan 26, 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 ETFs, with the Vanguard S&P 500 ETF making up nearly half of the allocation. This skew towards large-cap U.S. equities reflects a common benchmark composition but might limit diversification. The inclusion of the Fidelity Government Money Market Fund offers a conservative element, providing stability. However, the allocation to small-cap value and dividend-focused ETFs is relatively low, which could impact potential growth and income. A more diversified asset mix, including international equities or bonds, could provide better risk-adjusted returns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 14.15%, outperforming many benchmarks. However, it experienced a maximum drawdown of -21.19%, highlighting potential volatility. The fact that 90% of returns were achieved in just 22 days suggests a reliance on a few high-performing periods. While past performance is not indicative of future results, this trend underscores the importance of diversification to mitigate downturns and maintain steady growth.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. With a 50th percentile outcome of 577% and a 67th percentile of 808%, the portfolio shows strong growth potential. However, the reliance on historical data means these projections are not guarantees. The simulation's positive results in 993 out of 1,000 runs suggest a high probability of growth, but investors should remain cautious of unforeseen market changes.

Asset classes Info

  • Stocks
    82%
  • No data
    18%

The portfolio's allocation is predominantly in stocks (82%), with no significant cash holdings, which aligns with a growth-oriented strategy. This stock-heavy composition could lead to higher volatility, but it also offers potential for substantial returns. The absence of bonds or other fixed-income assets might limit defensive capabilities in a downturn. Adding diversified asset classes, such as bonds or real estate, could enhance stability and provide a buffer against market fluctuations.

Sectors Info

  • Technology
    26%
  • No data
    18%
  • Financials
    10%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Telecommunications
    7%
  • Industrials
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%
  • Consumer Discretionary
    1%

Technology dominates the sector allocation at 26%, which can drive growth but also increase volatility, especially during periods of interest rate hikes. The portfolio's exposure to financial services, consumer cyclicals, and healthcare provides some balance, but the relatively low allocation to defensive sectors like utilities and consumer defensive could leave it vulnerable in economic downturns. A more balanced sector allocation might improve resilience against sector-specific risks.

Regions Info

  • North America
    81%
  • No data
    18%
  • Europe Developed
    1%

The geographic allocation is heavily concentrated in North America, accounting for 81% of the portfolio. This U.S.-centric focus might benefit from the region's economic strength but also exposes the portfolio to domestic market risks. The minimal exposure to Europe and lack of emerging market investments limit global diversification. Increasing international holdings could reduce risk by spreading exposure across different economic environments and capturing growth in developing regions.

Market capitalization Info

  • Mega-cap
    33%
  • Large-cap
    28%
  • No data
    18%
  • Mid-cap
    13%
  • Small-cap
    4%
  • Micro-cap
    3%

The portfolio is largely invested in mega and big-cap stocks, which are typically more stable but offer less growth potential compared to smaller companies. With only 4% in small-cap and 3% in micro-cap stocks, the portfolio might miss out on high-growth opportunities. A more balanced distribution across market capitalizations could enhance growth potential while maintaining stability. Adjusting the allocation to include more mid and small-cap stocks might capture a broader range of market opportunities.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Fidelity Total Market Index Fund
    High correlation

The portfolio's assets show significant correlation, particularly between the Vanguard S&P 500 ETF and the Fidelity Total Market Index Fund. This high correlation limits diversification benefits, as these assets tend to move together, particularly in downturns. Reducing overlap by selecting less correlated assets could enhance diversification and risk management. Including assets with different market exposures or sectors could improve the portfolio's ability to withstand market volatility.

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, which seeks the best possible risk-return ratio. However, the current asset correlation suggests that diversification could be improved before attempting optimization. By adjusting allocations to less correlated assets, the portfolio might achieve a more efficient balance. This process does not guarantee diversification but aims to enhance potential returns for a given level of risk.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Fidelity Total Market Index Fund 0.20%
  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • Fidelity® Government Money Market Fund 4.80%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.84%

The portfolio's overall dividend yield is 1.84%, bolstered by the Schwab U.S. Dividend Equity ETF and the Fidelity Government Money Market Fund. While dividends provide a steady income stream, the yield is moderate, reflecting the portfolio's growth focus. For investors seeking higher income, increasing allocation to dividend-focused assets could be beneficial. However, this should be balanced with growth objectives to maintain an appropriate risk-return profile.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Fidelity Total Market Index Fund 0.02%
  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.05%, which supports better long-term performance by minimizing costs. The low TER is a positive aspect, as high fees can erode returns over time. Maintaining this cost efficiency is crucial, but investors should also ensure that low costs do not compromise the quality of holdings. Regularly reviewing the cost structure and comparing it to industry standards can help maintain this advantage.

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