Balanced Portfolio with Strong Historic Performance and High U.S. Exposure but Moderate Diversification

Report created on Aug 16, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed entirely of ETFs, with a significant allocation to the Vanguard Total Stock Market Index Fund ETF Shares at 40%. This ETF provides broad exposure to the U.S. stock market, contributing to the portfolio's overall performance. The remaining investments are diversified across small-cap value, dividend equity, and international markets, adding a layer of diversification. This composition aligns with a balanced investment strategy, aiming for growth while managing risk. The portfolio's ETF structure offers liquidity and cost-efficiency, which are essential for maintaining long-term growth potential.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a compound annual growth rate (CAGR) of 20.02%. This suggests that a hypothetical initial investment has grown significantly over time, albeit with a maximum drawdown of -22.09%. The performance is concentrated, as 90% of returns were generated in just 30 days, indicating volatility. This historical data underlines the portfolio's potential for high returns but also highlights the importance of being prepared for market fluctuations. It suggests that maintaining a long-term view can be beneficial to ride out periods of volatility.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. Assuming a hypothetical initial investment, the results show an annualized return of 21.26%, with a strong likelihood of positive returns as 999 simulations were favorable. The 5th percentile projection indicates a 269.87% return, while the median (50th percentile) is 1,116.93%. The projections suggest the portfolio could continue its strong performance, but it's essential to remain aware of potential risks and maintain a diversified strategy to manage uncertainty.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, accounting for 99.71% of the total allocation. This indicates a strong focus on equity investments, which can offer higher returns but also come with increased volatility. The minimal presence of bonds and other asset classes suggests limited exposure to fixed income, which could provide stability during market downturns. To enhance risk management, consider incorporating a more balanced mix of asset classes. This could help mitigate potential losses and provide a more stable return over time.

Sectors Info

  • Financials
    19%
  • Technology
    17%
  • Industrials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Energy
    8%
  • Consumer Staples
    7%
  • Telecommunications
    5%
  • Basic Materials
    5%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation is diverse, with significant investments in financial services, technology, and industrials. These sectors are known for their growth potential and have contributed to the portfolio's historical performance. However, there is relatively low exposure to utilities and real estate, which are traditionally considered more defensive sectors. To achieve a more balanced sector allocation, consider adjusting the portfolio to include sectors that may provide stability during economic downturns. This approach can help reduce risk and ensure the portfolio remains resilient in various market conditions.

Regions Info

  • North America
    82%
  • Europe Developed
    10%
  • Japan
    5%
  • Australasia
    2%
  • Asia Developed
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily concentrated in North America, with 81.63% of assets allocated to this region. While this focus has likely contributed to strong historical performance, it also exposes the portfolio to regional risks. There is limited exposure to other regions, such as Europe and Asia, which could offer growth opportunities and diversification benefits. To mitigate regional risk and capitalize on global market potential, consider increasing exposure to international markets. This could help balance the portfolio and reduce reliance on a single geographic area.

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 shows potential for optimization, particularly in enhancing diversification and reducing regional risk. By moving along the efficient frontier, investors can achieve a riskier or more conservative portfolio. To pursue a riskier approach, consider increasing exposure to high-growth assets or sectors. Conversely, a more conservative strategy might involve adding fixed income or defensive sectors. Before optimizing, focus on diversifying geographic exposure and reducing asset correlations to ensure the portfolio remains resilient in various market conditions.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.00%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • BNY Mellon International Equity ETF 2.80%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 2.02%

The portfolio boasts a healthy dividend yield of 2.02%, with contributions from all ETF holdings. The Schwab U.S. Dividend Equity ETF offers the highest yield at 3.3%, providing a steady income stream. Dividends can enhance total returns and offer a cushion during market volatility. The focus on dividend-paying ETFs aligns with a strategy to balance growth and income. To continue benefiting from dividends, consider maintaining or even increasing allocations to high-yield investments, ensuring a consistent income stream that complements capital appreciation.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • BNY Mellon International Equity ETF 0.04%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is low at 0.11%, reflecting the cost-efficiency of the ETF structure. This low cost is crucial for maximizing net returns over the long term. The Vanguard Total Stock Market Index Fund ETF Shares and BNY Mellon International Equity ETF have particularly low expense ratios, contributing to overall cost-effectiveness. Keeping investment costs low is essential for optimizing returns, so it's important to monitor and manage fees continuously. Consider maintaining or increasing allocations to low-cost investments to enhance the portfolio's cost efficiency further.

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