A balanced portfolio with a strong US focus and efficient cost structure

Report created on Dec 31, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is predominantly composed of ETFs, with a significant focus on equities. The largest holding, Vanguard Total World Stock Index Fund ETF, makes up 40% of the portfolio, followed by Vanguard S&P 500 ETF at 30%. Schwab U.S. Large-Cap Growth and Dividend Equity ETFs account for 20% and 10% respectively. This composition suggests a strong emphasis on broad market exposure, mainly through large-cap stocks. Compared to typical balanced portfolios, which might include more bonds or alternative assets, this portfolio leans heavily towards equities, which could provide higher returns but also increased volatility.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 13.25%, which is impressive. However, it experienced a maximum drawdown of -33.52%, indicating significant volatility. This performance outpaces many benchmarks, suggesting a robust growth potential. But it's important to remember that past performance doesn't guarantee future results. For investors comfortable with the ups and downs, this portfolio's historical returns can be reassuring, yet they should be prepared for potential downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential outcomes, suggests a promising future for this portfolio. With 1,000 simulations, the median projected return is 463.96%, and most simulations show positive returns. However, it's crucial to understand that these projections are based on historical trends and assumptions, which may not hold true in the future. Investors should use these projections as one of many tools in their decision-making process, rather than a definitive forecast.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, accounting for over 99% of its composition, with negligible allocations to cash and other asset classes. This focus on equities can lead to higher growth potential but also increases risk, especially during market downturns. Compared to more diversified portfolios, which might include bonds or real estate, this allocation lacks defensive assets that could provide stability. Considering a modest allocation to fixed income or alternative investments could enhance diversification and reduce volatility.

Sectors Info

  • Technology
    30%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    9%
  • Industrials
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is tech-heavy, with 30.34% allocated to technology. Other significant sectors include financial services, consumer cyclicals, and healthcare. This concentration in technology could lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. While this allocation has historically driven growth, balancing it with more stable sectors like consumer defensive or utilities could provide a buffer against sector-specific downturns and enhance diversification.

Regions Info

  • North America
    86%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily tilted towards North America, with 86% exposure, while other regions like Europe, Asia, and Latin America have minimal representation. This concentration can expose the portfolio to regional risks, such as economic downturns or policy changes in the US. Diversifying geographically by increasing exposure to emerging markets or developed regions outside North America could reduce risk and capture growth opportunities in less correlated markets.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard S&P 500 ETF
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio's assets are highly correlated, particularly among the Schwab U.S. Large-Cap Growth ETF, Vanguard S&P 500 ETF, and Vanguard Total World Stock Index Fund ETF. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. During market downturns, this could amplify losses. To enhance diversification, consider replacing some of these ETFs with others that have lower correlation to each other, potentially introducing different asset classes or regions.

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 helps identify the best risk-return balance. Currently, the portfolio's high correlation among assets limits diversification. By adjusting allocations to include less-correlated assets, the portfolio could achieve a more optimal balance, enhancing returns for a given level of risk. This strategy doesn't necessarily mean adding new assets, but rather reallocating existing ones to achieve the best possible risk-return ratio.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.57%

The portfolio's dividend yield stands at 1.57%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.7%. This yield provides a modest income stream, which can be appealing for investors seeking regular cash flow. However, the overall yield is relatively low, mainly due to the growth-oriented nature of other holdings. For those prioritizing income, increasing the allocation to higher-yielding assets could enhance cash flow, though it might also affect the growth potential.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.05%

With a Total Expense Ratio (TER) of 0.05%, the portfolio is cost-efficient, aligning well with best practices for minimizing investment costs. Lower fees can significantly enhance long-term returns by reducing the drag on performance. This efficiency is a strength of the portfolio, allowing more of the returns to compound over time. Investors should continue monitoring costs, ensuring they remain low, and consider this a key factor when evaluating potential new investments.

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