A balanced portfolio with a focus on US equities and moderate sector diversification
Report created on Dec 18, 2024Risk profile
4/7
Diversification profile
3/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 69.48% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 19.96% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 10.56%
This portfolio is heavily weighted in stocks, with nearly 70% allocated to the Vanguard Total Stock Market Index Fund ETF. The Schwab U.S. Dividend Equity ETF makes up about 20%, adding a focus on dividend-paying companies. The remaining 10.5% is in the Vanguard Total International Stock Index Fund ETF, providing some international exposure. This composition suggests a strong emphasis on U.S. equities, with a minor allocation to international markets. The portfolio is moderately diversified, primarily within the stock asset class. To enhance diversification, consider adding other asset classes like bonds or real estate investment trusts (REITs), which can provide stability and additional income streams.
Growth
Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 12.57%. However, it experienced a maximum drawdown of -34.41%, indicating significant volatility during market downturns. Understanding past performance helps set realistic expectations, but it's crucial to remember that past results don't guarantee future returns. The concentration in stocks can lead to high returns but also increases the risk of substantial losses. To mitigate this risk, consider diversifying into less volatile asset classes or allocating a portion to cash or short-term bonds to buffer against market fluctuations.
Projection
The portfolio's forward projection, based on a Monte Carlo simulation, shows a wide range of potential outcomes. With 1,000 simulations, the 5th percentile outcome is a 43.1% return, while the 67th percentile projects a 419.89% return. Monte Carlo simulations use historical data to model potential future performance, but they can't predict exact outcomes. This range highlights the inherent uncertainty in investing. To improve the likelihood of achieving your goals, regularly review and adjust your portfolio to align with changing market conditions and personal circumstances, ensuring it remains suitable for your risk tolerance and objectives.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is overwhelmingly invested in stocks, comprising 99.44% of the total allocation. This allocation indicates a high-risk, high-return strategy, as stocks tend to offer greater growth potential but also come with increased volatility. The minimal allocation to cash and other assets suggests limited protection against market downturns. To achieve better risk-adjusted returns, consider diversifying into other asset classes such as bonds, which can provide income and reduce overall portfolio risk. Balancing growth and stability can help achieve a more resilient investment strategy.
Sectors
- Technology 25%
- Financials 16%
- Health Care 12%
- Consumer Discretionary 11%
- Industrials 10%
- Telecommunications 7%
- Consumer Staples 7%
- Energy 5%
- Basic Materials 3%
- Real Estate 2%
- Utilities 2%
Sector allocation is diverse, with technology leading at 24.89%, followed by financial services and healthcare. This spread indicates a broad exposure to various economic sectors, which can help mitigate risks associated with sector-specific downturns. However, the heavy concentration in technology could lead to increased volatility, given its susceptibility to rapid changes in market conditions. To enhance sector diversification, consider increasing exposure to underrepresented sectors like utilities or real estate, which may offer more stable returns and act as a hedge against potential technology sector downturns.
Regions
- North America 90%
- Europe Developed 4%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 1%
- Australasia 1%
The portfolio is heavily skewed towards North American assets, making up almost 90% of the geographic allocation. While this concentration benefits from the stability and growth of the U.S. market, it limits exposure to potential growth opportunities in other regions. A more geographically diversified portfolio could help mitigate risks associated with regional economic downturns. Consider increasing allocations to emerging markets or underrepresented regions like Europe or Asia to capture potential growth and enhance overall diversification, reducing reliance on North American market performance.
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 current allocation can be optimized using the Efficient Frontier concept, which identifies the best possible risk-return ratio. Optimization involves adjusting the weightings of existing assets to achieve a more efficient portfolio without necessarily adding new assets. By reallocating within the current holdings, you can potentially improve returns or reduce risk. Regularly reassess your portfolio's position on the Efficient Frontier to ensure it aligns with your risk tolerance and investment objectives. Remember, optimization focuses on efficiency, not diversification or other goals, so balance is key.
Dividends
- Schwab U.S. Dividend Equity ETF 3.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 1.60%
- Weighted yield (per year) 1.72%
The portfolio's dividend yield stands at 1.72%, with the Schwab U.S. Dividend Equity ETF contributing a significant 3.6%. Dividends provide a steady income stream, which can be particularly valuable during periods of market volatility. This income can be reinvested to enhance long-term growth or used to meet cash flow needs. To optimize dividend income, consider reviewing the dividend policies of the underlying holdings and potentially reallocating to higher-yielding assets. Balancing growth and income can help achieve a more stable return profile, particularly for investors seeking regular income.
Ongoing product costs
- Schwab U.S. Dividend Equity ETF 0.06%
- Vanguard Total Stock Market Index Fund ETF Shares 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 0.04%, indicating low management costs. Lower costs can significantly enhance long-term returns, as they reduce the drag on portfolio performance. It's important to regularly review your portfolio's costs to ensure they remain competitive. Consider exploring other low-cost investment options or negotiating fees where possible to further reduce expenses. Keeping costs in check is a crucial aspect of maximizing investment returns, particularly in a low-interest-rate environment where every basis point counts towards achieving financial goals.
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