A balanced portfolio with a focus on large-cap U.S. equities and moderate dividends
Report created on Dec 30, 2024Risk profile
4/7
Diversification profile
3/5
Positions
-
SC Schwab U.S. Large-Cap ETF
SCHX - US8085242019 26.06% -
FN Schwab Fundamental U.S. Large Company Index ETF
FNDX - US8085247711 19.76% -
FN Schwab Fundamental U.S. Small Company Index ETF
FNDA - US8085247638 18.36% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 17.93% -
FN Schwab Fundamental International Large Company Index ETF
FNDF - US8085247554 17.88%
The portfolio is heavily weighted towards U.S. large-cap equities, with a total of 63% dedicated to two ETFs focusing on this segment. Another 18% is allocated to U.S. small-cap equities, while international exposure is limited to just under 18%. This composition aligns with a common large-cap-focused benchmark but shows a heavier U.S. bias. For a balanced profile, this setup provides a solid foundation but may lack sufficient diversification across asset classes and regions.
Growth
Historically, the portfolio has delivered a robust CAGR of 12.71%, reflecting strong past performance. The maximum drawdown of -36.58% indicates significant volatility during market downturns. Compared to benchmarks, this performance suggests resilience but also highlights the potential for substantial losses. While past performance is not a predictor of future results, understanding these trends can help set realistic expectations for future returns.
Projection
The Monte Carlo simulation, which uses historical data to predict future outcomes, shows a wide range of potential results. The median (50th percentile) projection suggests a 360.2% return, while the 5th percentile is much lower at 50.02%. This variance underscores the uncertainty inherent in investing. While 989 out of 1,000 simulations suggest positive returns, the range of outcomes highlights the importance of preparing for various scenarios.
Asset classes
- Stocks 100%
With nearly 100% of the portfolio in stocks, the asset class allocation is heavily skewed towards equities, lacking significant exposure to bonds or other asset classes. This concentration can lead to high volatility, especially during market downturns. While a high equity allocation can drive growth, diversifying into bonds or other assets could help mitigate risk and stabilize returns over time.
Sectors
- Financials 18%
- Technology 17%
- Industrials 13%
- Consumer Discretionary 12%
- Health Care 10%
- Consumer Staples 8%
- Telecommunications 7%
- Energy 7%
- Basic Materials 4%
- Real Estate 3%
- Utilities 3%
The portfolio's sector allocation is well-diversified across key industries, with financial services and technology leading the way. This balance aligns with common benchmarks, providing a good mix of growth and income opportunities. However, sector trends like tech volatility during interest rate hikes could impact performance. Regularly reviewing sector weights can help maintain an optimal balance as market conditions change.
Regions
- North America 83%
- Europe Developed 9%
- Japan 5%
- Asia Developed 1%
- Australasia 1%
With over 83% exposure to North America, the portfolio is heavily concentrated in this region, underweighting international markets. While strong U.S. performance has historically driven returns, this geographic bias may limit diversification benefits. Introducing more assets from Europe, Asia, or emerging markets could enhance global exposure and reduce reliance on a single region's economic performance.
Redundant positions
-
High correlationSchwab Fundamental U.S. Large Company Index ETFSchwab U.S. Dividend Equity ETF
The portfolio includes highly correlated assets, notably between the Schwab Fundamental U.S. Large Company Index ETF and the Schwab U.S. Dividend Equity ETF. High correlation means these assets tend to move together, reducing diversification benefits. By identifying and potentially replacing these overlapping holdings, the portfolio could achieve better risk management and more efficient diversification.
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 risk-return ratio. By adjusting the current asset allocation, it may be possible to enhance returns without increasing risk. This process involves reallocating investments among existing assets to achieve a more efficient portfolio. However, it focuses solely on optimizing within the portfolio's current holdings, not introducing new assets.
Dividends
- Schwab Fundamental U.S. Small Company Index ETF 1.20%
- Schwab Fundamental International Large Company Index ETF 4.00%
- Schwab Fundamental U.S. Large Company Index ETF 3.80%
- Schwab U.S. Dividend Equity ETF 3.60%
- Schwab U.S. Large-Cap ETF 2.60%
- Weighted yield (per year) 3.01%
The portfolio's dividend yield stands at 3.01%, providing a decent income stream. This is particularly relevant for investors seeking regular income alongside capital growth. The inclusion of the Schwab U.S. Dividend Equity ETF enhances this yield, making it attractive for income-focused investors. However, balancing dividend yield with growth potential is crucial to ensure overall portfolio performance aligns with investment goals.
Ongoing product costs
- Schwab Fundamental U.S. Small Company Index ETF 0.25%
- Schwab Fundamental International Large Company Index ETF 0.25%
- Schwab Fundamental U.S. Large Company Index ETF 0.25%
- Schwab U.S. Dividend Equity ETF 0.06%
- Schwab U.S. Large-Cap ETF 0.03%
- Weighted costs total (per year) 0.16%
With a total expense ratio (TER) of 0.16%, the portfolio is cost-efficient, supporting better long-term returns. Low costs are advantageous as they minimize the drag on performance, allowing more of the portfolio's returns to be retained by the investor. Regularly reviewing and comparing expense ratios can ensure ongoing cost-effectiveness, potentially boosting net returns over time.
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