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A well-diversified balanced portfolio with a focus on dividend income and low costs

Report created on Jan 20, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification
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Positions

This portfolio is structured with a strong emphasis on equities, comprising 89% stocks, 10% bonds, and 1% cash. The allocation includes a mix of domestic and international equity ETFs, along with a U.S. bond ETF, offering a balanced approach. The portfolio's composition is well-aligned with a balanced investment strategy, providing both growth potential and income generation. Compared to a typical benchmark, this portfolio offers a diversified exposure across various geographies and sectors. To maintain this balance, consider periodic rebalancing to ensure that the desired asset allocation is upheld.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 10.51%. This indicates strong growth over time, although it experienced a maximum drawdown of -30.71%, reflecting significant volatility during market downturns. Compared to benchmarks, this performance is commendable, suggesting effective asset selection and diversification. However, it's important to remember that past performance doesn't guarantee future results. To mitigate potential drawdowns, consider maintaining a diversified mix of assets and potentially increasing bond exposure for added stability.

Projection Info

Forward projections using Monte Carlo simulations provide insights into potential future outcomes. With 1,000 simulations, the portfolio shows a median return of 214.8%, with 970 simulations yielding positive returns. This suggests a strong likelihood of continued growth. However, the 5th percentile shows a much lower return of 17.3%, highlighting possible downside risks. Monte Carlo analysis uses historical data to simulate potential outcomes, but it's crucial to note that these projections are not guarantees. To enhance future performance, consider regularly reviewing asset allocations and staying informed about market trends.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio's allocation is heavily weighted towards stocks at 89%, with a smaller 10% in bonds. This high equity exposure suggests potential for growth but also increased volatility. Compared to typical benchmarks, this allocation is aggressive for a balanced profile. The bond allocation provides some stability and income, which is beneficial during market downturns. To enhance diversification, consider increasing the bond allocation or exploring alternative asset classes like real estate or commodities, which can provide additional stability and diversification benefits.

Sectors Info

  • Technology
    23%
  • Financials
    15%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Consumer Staples
    7%
  • Telecommunications
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio is notably concentrated in the technology sector at 23%, followed by financial services at 15% and healthcare at 10%. This sector allocation aligns with many growth-focused benchmarks but may introduce higher volatility, especially during economic shifts affecting these industries. A diverse sector allocation can mitigate risks associated with sector-specific downturns. To improve resilience, consider balancing exposure across more defensive sectors like utilities or consumer staples, which can offer stability in volatile markets.

Regions Info

  • North America
    66%
  • Asia Emerging
    8%
  • Europe Developed
    6%
  • Asia Developed
    4%
  • Japan
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America at 66%, with limited exposure to emerging markets and other regions. This concentration aligns with many U.S.-based benchmarks but may limit diversification benefits. Geographic diversification can reduce risk by spreading investments across different economies and currencies. To enhance global exposure, consider increasing allocations to underrepresented regions like Europe or Asia, which can provide growth opportunities and hedge against potential downturns in the U.S. market.

Market capitalization Info

  • Mega-cap
    35%
  • Large-cap
    34%
  • Mid-cap
    16%
  • Small-cap
    3%
  • Micro-cap
    1%

The portfolio's market capitalization is predominantly in mega and big caps, comprising 69% of the total allocation. This focus on larger companies offers stability and lower volatility compared to smaller caps. However, it may limit growth potential, as smaller companies can offer higher returns. To improve diversification and potential returns, consider increasing exposure to medium and small-cap stocks. This can enhance growth potential while maintaining a balanced risk profile, as smaller companies often outperform larger ones over the long term.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Dividend Appreciation Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets, such as the Schwab U.S. Large-Cap Growth ETF and Vanguard Total Stock Market Index Fund ETF Shares. These correlations suggest that these assets move together, reducing diversification benefits. In market downturns, highly correlated assets can exacerbate losses. To enhance diversification, consider reducing exposure to overlapping assets and adding assets with lower correlations. This can improve the portfolio's resilience and risk-adjusted returns, providing better protection during volatile markets.

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.

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The portfolio can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. This involves adjusting the allocation between existing assets to achieve an optimal balance. While the current allocation is well-diversified, optimizing along the Efficient Frontier can enhance returns without significantly increasing risk. This approach focuses solely on improving the risk-return trade-off, not diversification. Consider using tools or consulting with a financial advisor to explore potential allocation adjustments.

Dividends Info

  • iShares Core U.S. Aggregate Bond ETF 3.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 2.09%

The portfolio's dividend yield is 2.09%, with contributions from various ETFs, including a 3.70% yield from the iShares Core U.S. Aggregate Bond ETF. Dividends provide a steady income stream, which is valuable for reinvestment or income-focused investors. This yield aligns with a balanced investment strategy, offering both growth and income. To enhance income potential, consider increasing allocations to high-dividend sectors or exploring dividend-focused ETFs. This can improve cash flow and provide a buffer during market volatility.

Ongoing product costs Info

  • iShares Core U.S. Aggregate Bond ETF 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is a low 0.05%, reflecting cost-effective ETF selections. Low costs are crucial for long-term performance, as they minimize the drag on returns. Compared to average expense ratios, this portfolio is well-positioned to maximize net returns. To maintain this advantage, continue prioritizing low-cost investment options and periodically review fund expenses. Reducing costs further can enhance compounding effects and improve overall portfolio performance over time.

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