Balanced portfolio with a focus on U.S. equities and moderate bond exposure

Report created on Jan 19, 2025

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 of a mix of ETFs, with the largest allocation in the Vanguard S&P 500 ETF at 21.53%. This allocation indicates a strong focus on U.S. equities, which is common for balanced portfolios. The bond exposure, through the Vanguard Total Bond Market Index Fund and iShares U.S. Treasury Bond ETF, provides stability and income. Compared to typical balanced portfolios, this one leans slightly more towards equities, which can offer higher growth potential but also increased volatility. Consider reviewing the equity-to-bond ratio to ensure it aligns with your risk tolerance and financial goals.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 11.22%, indicating robust performance. However, it also experienced a maximum drawdown of -25.76%, reflecting significant potential losses during downturns. This is typical for portfolios with substantial equity exposure. Comparing to benchmarks, this performance is commendable but highlights the importance of maintaining a long-term perspective to ride out market volatility. Consider setting aside a cash reserve to manage liquidity during downturns and avoid selling assets at a loss.

Projection Info

The Monte Carlo analysis projects a wide range of potential outcomes, with a 50th percentile growth of 275.49% and a 67th percentile at 436.16%. This simulation uses historical data to estimate future performance, but remember, past performance doesn't guarantee future results. The portfolio shows a high likelihood of positive returns, with 950 out of 1,000 simulations yielding gains. While these projections are optimistic, it's crucial to regularly reassess your portfolio, especially during significant market changes, to ensure alignment with your investment goals.

Asset classes Info

  • Stocks
    62%
  • Bonds
    29%
  • Real Estate
    8%

The portfolio is diversified across three main asset classes: stocks (61.78%), bonds (29.45%), and real estate (8.47%). This allocation provides a balanced approach, offering growth potential from equities and stability from bonds. The real estate component adds another layer of diversification. Compared to benchmarks, this mix is fairly typical for a balanced portfolio. Consider periodically reviewing the allocation to ensure it aligns with your risk tolerance, especially if market conditions change or your financial situation evolves.

Sectors Info

  • Technology
    19%
  • Financials
    10%
  • Real Estate
    9%
  • Consumer Discretionary
    7%
  • Industrials
    7%
  • Health Care
    5%
  • Telecommunications
    4%
  • Energy
    3%
  • Consumer Staples
    3%
  • Basic Materials
    2%
  • Utilities
    1%

Sector allocation is diversified, with the highest concentration in technology at 19.00%. This tech-heavy focus can lead to higher volatility, especially during interest rate hikes. Other sectors like financial services, real estate, and consumer cyclicals provide additional diversification. Compared to benchmarks, the sector distribution is well-rounded, though the tech concentration could be reassessed if market conditions shift. To mitigate risk, consider gradually diversifying into underrepresented sectors to balance potential volatility with stable growth.

Regions Info

  • North America
    61%
  • Europe Developed
    6%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographic exposure is predominantly in North America at 60.81%, with limited exposure to other regions. This concentration on U.S. markets can result in higher risk if economic conditions in the region worsen. Compared to global benchmarks, the portfolio is underexposed to emerging markets and other international regions. Expanding geographic diversification could reduce risk and capture growth opportunities in other parts of the world. Consider adding international ETFs to increase exposure to global markets and enhance diversification.

Redundant positions Info

  • Fidelity® MSCI Information Technology Index ETF
    Schwab U.S. Large-Cap Growth ETF
    High correlation

The portfolio contains highly correlated assets, particularly in the technology sector, such as the Fidelity® MSCI Information Technology Index ETF and Schwab U.S. Large-Cap Growth ETF. High correlation means these assets tend to move together, which can limit diversification benefits, especially during market downturns. To improve diversification, consider replacing one of the correlated assets with a less correlated alternative. This adjustment can help manage risk and improve the portfolio's resilience to market 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 could be optimized using the Efficient Frontier, focusing on the best possible risk-return ratio. This involves adjusting allocations among existing assets to achieve optimal efficiency. However, optimization is based solely on the current assets and doesn't necessarily improve diversification or other goals. Before optimizing, consider addressing the high correlation among certain assets to enhance diversification. Once optimized, periodically review and adjust the portfolio to maintain its efficiency as market conditions change.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Fidelity® MSCI Information Technology Index ETF 0.40%
  • iShares U.S. Treasury Bond ETF 3.20%
  • iShares MBS ETF 3.30%
  • Schwab International Equity ETF 1.00%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Schwab U.S. REIT ETF 3.20%
  • Vanguard S&P 500 ETF 1.20%
  • Invesco S&P MidCap Momentum ETF 0.20%
  • Weighted yield (per year) 1.88%

The portfolio's dividend yield is 1.88%, with notable contributions from bond and real estate ETFs. Dividends provide a steady income stream, which can be particularly valuable during volatile market periods. While the yield is moderate, it complements the portfolio's growth potential. If income generation is a priority, consider increasing allocations to higher-yielding assets. Regularly reinvesting dividends can also enhance long-term returns through compounding, supporting wealth accumulation over time.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • iShares U.S. Treasury Bond ETF 0.05%
  • iShares MBS ETF 0.04%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Schwab U.S. REIT ETF 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, which is impressively low and supports better long-term performance by minimizing costs. This low cost is a positive aspect, as fees can significantly impact net returns over time. Maintaining low-cost investments is crucial for maximizing growth potential. Regularly review the expense ratios of your holdings and consider switching to lower-cost alternatives if available. This strategy can help preserve more of your investment returns and enhance overall portfolio efficiency.

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