A cautious portfolio with a strong US focus and moderate growth potential
Report created on Jan 3, 2025Risk profile
3/7
Diversification profile
1/5
Positions
-
SG iShares® 0-3 Month Treasury Bond ETF
SGOV - US46436E7186 40.00% -
SP SPDR® Portfolio S&P 500 ETF
SPLG - US78464A8541 30.00% -
AA Apple Inc
AAPL - US0378331005 20.00% -
SB Starbucks Corporation
SBUX - US8552441094 10.00%
The portfolio consists of four main positions: a short-term Treasury bond ETF, an S&P 500 ETF, and individual stocks in Apple and Starbucks. With 40% in Treasury bonds, it leans heavily towards low-risk assets, reflecting a cautious approach. Compared to a typical balanced portfolio, this composition is heavily weighted towards cash and large-cap US stocks, offering stability but limited diversification. To enhance diversification, consider adding more asset classes like international stocks or bonds, which can provide additional growth opportunities and risk management.
Growth
Historically, the portfolio has delivered a solid CAGR of 13.03%, which is impressive for a cautious profile. However, it experienced a maximum drawdown of -20.05%, indicating potential vulnerability during market downturns. This performance compares favorably to common benchmarks, demonstrating the strength of its core holdings. While past performance is not indicative of future results, maintaining a focus on high-quality assets could continue to support strong returns. Consider periodic reviews to ensure the portfolio remains aligned with your risk tolerance and financial goals.
Projection
The Monte Carlo simulation, using historical data, projects a range of potential outcomes for the portfolio. With 1,000 simulations, the median outcome suggests a 495.9% increase, indicating robust growth potential. However, projections are based on historical trends and may not account for future market changes. The simulation shows a high probability of positive returns, but it's crucial to remember that unexpected events can impact outcomes. Regularly reviewing and adjusting the portfolio can help manage risks and capitalize on opportunities as they arise.
Asset classes
- Stocks 60%
- Cash 40%
The portfolio is primarily composed of stocks (approximately 60%) and cash (40%), indicating a focus on capital preservation and moderate growth. This allocation provides a cushion against volatility but may limit growth potential compared to a more equity-heavy portfolio. By diversifying into additional asset classes, such as international equities or fixed-income securities, you can potentially enhance returns and reduce risk. Aligning asset allocation with your investment goals and risk tolerance is essential for long-term success.
Sectors
- Technology 30%
- Consumer Discretionary 13%
- Financials 4%
- Health Care 3%
- Telecommunications 3%
- Industrials 2%
- Consumer Staples 2%
- Energy 1%
- Utilities 1%
- Real Estate 1%
- Basic Materials 1%
Sector allocation is concentrated in technology (30%) and consumer cyclicals (13.5%), with minimal exposure to other sectors. This concentration can lead to higher volatility, especially in sectors sensitive to economic cycles. While technology has been a strong performer, reliance on a few sectors may expose the portfolio to sector-specific risks. To mitigate this, consider diversifying into underrepresented sectors, which can provide stability and balance. Aligning sector allocation with market trends and economic conditions can help optimize returns.
Regions
- North America 60%
The portfolio's geographic exposure is heavily skewed towards North America (nearly 60%), with minimal investment in other regions. While this focus aligns with a US-based investor's familiarity, it limits exposure to global growth opportunities. Expanding geographic diversification could enhance returns and reduce risk by capturing growth in emerging markets and developed economies. Consider adding international assets to balance regional exposure, which can provide a hedge against US market volatility and currency fluctuations.
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 can be optimized using the Efficient Frontier to achieve a better risk-return balance. Currently, the optimal portfolio suggests an expected return of 2.68% with a lower risk level. This involves reallocating assets to achieve the best possible risk-return ratio based on historical data. However, efficiency doesn't guarantee diversification or meet all investment goals. Regularly reviewing asset allocation and adjusting based on market conditions and personal objectives can enhance portfolio performance while managing risk.
Dividends
- Apple Inc 0.40%
- Starbucks Corporation 2.50%
- iShares® 0-3 Month Treasury Bond ETF 5.10%
- SPDR® Portfolio S&P 500 ETF 1.30%
- Weighted yield (per year) 2.76%
The portfolio's dividend yield stands at 2.76%, with contributions from Apple, Starbucks, and the ETFs. Dividends can provide a steady income stream, especially in low-interest environments. For cautious investors, dividends offer a buffer against market volatility and can be reinvested for growth. Ensuring a balanced mix of dividend-paying and growth-oriented assets can help meet income needs while pursuing capital appreciation. Regularly reviewing dividend policies and yields of holdings can optimize income generation.
Ongoing product costs
- iShares® 0-3 Month Treasury Bond ETF 0.07%
- SPDR® Portfolio S&P 500 ETF 0.02%
- Weighted costs total (per year) 0.03%
The portfolio's total expense ratio (TER) is low at 0.03%, indicating cost efficiency. This aligns well with best practices, as lower costs can significantly enhance long-term returns by minimizing drag on performance. Even small cost reductions can compound over time, boosting overall gains. Regularly reviewing and comparing fees with other similar investments can ensure continued cost-effectiveness. Maintaining a focus on low-cost options while balancing quality and performance is key for maximizing returns.
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