A cautious portfolio with strong historic growth and moderate diversification across sectors

Report created on Dec 19, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of a mix of ETFs, common stocks, and funds, with a notable 78.6% allocation to stocks. This composition leans towards growth, with a minor allocation to bonds and cash. Compared to typical cautious portfolios, this one has a higher equity exposure, which can enhance growth potential but also increase volatility. To align with a cautious investor profile, consider increasing bond and cash allocations to provide more stability and income. Balancing equities with fixed-income assets can help mitigate risks associated with market fluctuations.

Growth Info

Historically, this portfolio has achieved a robust Compound Annual Growth Rate (CAGR) of 17.86%, which is impressive for a cautious risk classification. This indicates that the portfolio has been able to capture significant market upswings. However, the maximum drawdown of -8.92% suggests exposure to some volatility. Comparing this to a typical cautious portfolio, which usually has lower returns but also lower drawdowns, it might be wise to evaluate if this level of risk aligns with your comfort zone. Consider diversifying further or adjusting allocations for stability.

Projection Info

Monte Carlo simulations project a wide range of potential outcomes based on historical data, suggesting a 50th percentile return of 874.31%. This method uses past performance to simulate future scenarios, but it’s important to remember that these projections are not guarantees. The high number of simulations with positive returns (998 out of 1,000) is encouraging, indicating potential for continued growth. However, to manage expectations, regularly review and adjust the portfolio as needed to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    79%
  • Bonds
    14%
  • Cash
    4%
  • No data
    3%

The portfolio's primary asset class is stocks at 78.6%, with bonds making up 14% and cash at 4.4%. This allocation suggests a focus on growth, with some income and liquidity from bonds and cash. Compared to benchmarks for cautious profiles, this portfolio is stock-heavy, which can lead to higher returns but also increased risk. To enhance diversification, consider increasing bond or cash holdings, which can provide stability during market downturns. Balancing asset classes can help achieve a more stable risk-return profile.

Sectors Info

  • Technology
    20%
  • Consumer Discretionary
    14%
  • Health Care
    12%
  • Financials
    7%
  • Telecommunications
    6%
  • Energy
    5%
  • Real Estate
    5%
  • Industrials
    4%
  • Consumer Staples
    3%
  • Basic Materials
    1%
  • Utilities
    1%
  • Consumer Discretionary
    1%

The sector allocation shows a strong emphasis on technology (20.2%), consumer cyclicals (13.8%), and healthcare (12.2%). This composition aligns with growth sectors but may expose the portfolio to sector-specific risks. For instance, tech-heavy portfolios might face volatility during regulatory changes or interest rate hikes. A more balanced sector approach could mitigate such risks. Consider diversifying into underrepresented sectors like utilities or basic materials, which often provide stability and income, aligning with a cautious investment strategy.

Regions Info

  • North America
    80%
  • No data
    6%
  • Europe Developed
    1%

Geographically, the portfolio is heavily weighted towards North America at 80%, with minimal exposure to other regions. This concentration could limit potential benefits from global diversification, such as reduced volatility and exposure to different economic cycles. Expanding geographic exposure to include more developed and emerging markets could enhance diversification and capture growth opportunities outside the U.S. Consider international ETFs or funds to achieve a more balanced global allocation, which can reduce regional risks and improve returns.

Redundant positions Info

  • Invesco QQQ Trust
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio shows high correlation between certain assets, notably the Invesco QQQ Trust and Vanguard Growth Index Fund ETF Shares. Correlated assets tend to move together, which can limit diversification benefits, especially during market downturns. Reducing exposure to overlapping assets can enhance diversification and lower risk. Consider replacing highly correlated assets with those having different risk-return profiles. This strategy can optimize the portfolio's performance by ensuring that not all assets react similarly to market changes.

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.

While the portfolio's current risk-return profile is commendable, optimizing it via the Efficient Frontier could enhance returns. This involves reallocating existing assets to achieve the best possible risk-return ratio. The analysis suggests potential for an expected return of 5.25% with a similar risk level. This optimization does not necessarily mean adding new assets but adjusting current allocations. Regularly reviewing the portfolio and making data-driven adjustments can help maintain an efficient investment strategy aligned with your risk tolerance.

Dividends Info

  • Alphabet Inc Class C 0.30%
  • Goldman Sachs Group Inc 1.50%
  • COLUMBIA DIVIDEND INCOME FUND COLUMBIA DIVIDEND INCOME FUND CLASS Z 1.40%
  • Home Depot Inc 2.30%
  • McDonald’s Corporation 2.30%
  • Microsoft Corporation 0.70%
  • NUVEEN SANTA BARBARA DIVIDEND GROWTH FUND NUVEEN SANTA BARBARA DIVIDEND GROWTH FUND - CLASS I 1.20%
  • Realty Income Corp 5.90%
  • US Treasury 12 Month Bill ETF 4.30%
  • Pimco Corporate & Income Strategy Fund 9.30%
  • Pfizer Inc 6.50%
  • AAM Low Duration Preferred and Income Securities ETF 7.10%
  • PRUDENTIAL SHORT-TERM CORPORATE BOND FUND INC. CLASS Z 3.80%
  • Invesco QQQ Trust 0.40%
  • Invesco S&P 500® Equal Weight ETF 1.20%
  • Rbb Fund Inc - Us Treasury 3 Month Bill ETF 4.70%
  • UnitedHealth Group Incorporated 1.70%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Exxon Mobil Corp 3.50%
  • Weighted yield (per year) 2.35%

The portfolio has a total dividend yield of 2.35%, with notable contributions from Realty Income Corp (5.9%) and Pfizer Inc (6.5%). Dividends provide a steady income stream, which is beneficial for cautious investors seeking regular returns. This yield is competitive, offering both income and potential for capital appreciation. To maintain or increase income, consider reinvesting dividends or adding higher-yielding assets. Balancing growth and income can enhance the portfolio’s stability and align with long-term financial goals.

Ongoing product costs Info

  • COLUMBIA DIVIDEND INCOME FUND COLUMBIA DIVIDEND INCOME FUND CLASS Z 0.65%
  • VanEck Morningstar Wide Moat ETF 0.47%
  • NUVEEN SANTA BARBARA DIVIDEND GROWTH FUND NUVEEN SANTA BARBARA DIVIDEND GROWTH FUND - CLASS I 0.67%
  • US Treasury 12 Month Bill ETF 0.15%
  • Pimco Corporate & Income Strategy Fund 0.85%
  • AAM Low Duration Preferred and Income Securities ETF 0.46%
  • PRUDENTIAL SHORT-TERM CORPORATE BOND FUND INC. CLASS Z 0.47%
  • Invesco QQQ Trust 0.20%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • Rbb Fund Inc - Us Treasury 3 Month Bill ETF 0.15%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.20%

The average Total Expense Ratio (TER) of 0.2% is commendably low, supporting better long-term performance by minimizing costs. High fees can erode returns over time, so maintaining low costs is crucial. While most assets have reasonable fees, reviewing and potentially replacing higher-cost funds could further improve cost efficiency. Consider lower-cost alternatives or ETFs with similar exposure but lower fees. This can enhance net returns and ensure more of your investment works towards achieving your financial goals.

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