Balanced Portfolio with Strong Dividend Focus and High Geographic Concentration in North America

Report created on Nov 28, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio consists of a mix of common stocks and ETFs, with a significant emphasis on dividend-paying assets. The allocation is heavily skewed towards equities, comprising over 94% of the portfolio, while bonds make up a small portion. This composition reflects a balanced approach, aiming for both growth and income. However, the single-focused diversification suggests a potential concentration risk. Increasing diversity could help mitigate risks associated with market fluctuations and sector-specific downturns. Consider exploring additional asset classes to enhance diversification and reduce volatility.

Growth Info

Historically, the portfolio has delivered a commendable compound annual growth rate (CAGR) of 12.39%, indicating strong performance over time. However, the maximum drawdown of -36.81% highlights the potential risk during market downturns. This performance suggests that while the portfolio can provide substantial returns, it is also susceptible to significant fluctuations. To improve resilience, consider strategies that can reduce drawdowns, such as increasing exposure to defensive assets or incorporating more fixed-income securities to cushion against volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, the portfolio's future performance was projected, assuming a hypothetical initial investment. The simulation suggests a wide range of outcomes, with the 5th percentile showing a potential loss of -51.48% and the 67th percentile indicating a gain of 351.42%. The median outcome is a 191.56% increase, reflecting the portfolio's balanced nature. While the potential for high returns exists, so does the risk of loss. Regularly reviewing asset allocation and adjusting based on market conditions can help manage risk and align with long-term goals.

Asset classes Info

  • Stocks
    95%
  • Bonds
    6%

This portfolio is predominantly equity-focused, with stocks making up nearly 95% of the allocation. The remaining portion is invested in bonds, providing some level of income stability. The heavy reliance on equities suggests a growth-oriented strategy but also introduces higher volatility. To achieve a more balanced risk-return profile, consider increasing the bond allocation. This could provide a buffer against market volatility and offer more consistent income, especially during periods of market stress or economic downturns.

Sectors Info

  • Real Estate
    20%
  • Financials
    17%
  • Energy
    17%
  • Utilities
    12%
  • Industrials
    8%
  • Consumer Staples
    7%
  • Consumer Discretionary
    7%
  • Health Care
    3%
  • Technology
    3%
  • Telecommunications
    1%
  • Basic Materials
    1%

Sector allocation reveals a concentration in Real Estate, Financial Services, and Energy, which together comprise a significant portion of the portfolio. This concentration could expose the portfolio to sector-specific risks, such as regulatory changes or economic shifts affecting these industries. Diversifying across more sectors could help mitigate these risks and provide a more stable return. Consider evaluating the current sector weights and exploring opportunities in underrepresented sectors to achieve a more balanced sector allocation.

Regions Info

  • North America
    100%

The portfolio is highly concentrated in North America, with over 99% of assets allocated to this region. This geographic focus may limit exposure to growth opportunities in other parts of the world and increase vulnerability to regional economic downturns. Expanding geographic diversification could help capture global growth and reduce regional risk. Consider exploring international markets to enhance geographic balance and potentially improve the portfolio's long-term growth prospects.

Redundant positions Info

  • Vanguard High Dividend Yield Index Fund ETF Shares
    iShares Core High Dividend ETF
    Schwab U.S. Dividend Equity ETF
    High correlation

The portfolio contains highly correlated assets, particularly among dividend-focused ETFs. This correlation suggests limited diversification benefits, as these assets may move in tandem during market fluctuations. Reducing overlap by selecting unique, complementary assets can enhance diversification and improve risk-adjusted returns. Consider evaluating the correlation among current holdings and adjusting the allocation to include assets with lower correlations, thereby reducing overall portfolio risk.

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.

Before optimizing, it's crucial to address the overlap in highly correlated assets, which doesn't contribute to diversification. By reducing these assets, the portfolio can become more efficient. Moving along the efficient frontier allows for either a riskier or more conservative portfolio. For a riskier approach, consider increasing equity exposure, while a conservative shift might involve more bonds. Achieving an optimal balance requires aligning risk tolerance with financial goals, ensuring the portfolio meets long-term objectives.

Dividends Info

  • Atmos Energy Corporation 2.20%
  • Bank of Montreal 4.70%
  • PIMCO Active Bond Exchange-Traded Fund 5.50%
  • Caterpillar Inc 1.30%
  • CVR Energy Inc 7.80%
  • Clearway Energy Inc Class C 5.50%
  • Enterprise Products Partners LP 6.20%
  • Greif Bros Corporation 3.00%
  • Gaming & Leisure Properties 5.80%
  • iShares Core High Dividend ETF 3.30%
  • Horizon Technology Finance 13.00%
  • Kimberly-Clark Corporation 3.50%
  • LCNB Corporation 5.10%
  • Realty Income Corp 5.30%
  • Plains All American Pipeline LP 7.00%
  • Prologis Inc 3.20%
  • Public Storage 3.40%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard Russell 2000 Index Fund ETF Shares 1.20%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 4.43%

With a total yield of 4.43%, the portfolio offers a solid income stream, primarily driven by dividend-paying stocks and ETFs. This yield is attractive for investors seeking income, but it's important to ensure the sustainability of these dividends. Regularly reviewing the financial health of dividend-paying companies can help maintain a reliable income stream. Consider diversifying the sources of dividends to mitigate the risk of dividend cuts and to ensure a stable income over time.

Ongoing product costs Info

  • PIMCO Active Bond Exchange-Traded Fund 0.58%
  • iShares Core High Dividend ETF 0.08%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Russell 2000 Index Fund ETF Shares 0.10%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is relatively low, with costs primarily driven by the PIMCO Active Bond ETF at 0.58%. Keeping investment costs low is crucial for maximizing net returns over time. Regularly reviewing and optimizing the cost structure can enhance overall performance. Consider evaluating the cost-effectiveness of current holdings and exploring lower-cost alternatives, if available, to reduce expenses and improve net returns.

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