A balanced portfolio with high concentration in US equities and strong dividend yield

Report created on Jan 5, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is split evenly between two ETFs: JPMorgan Equity Premium Income ETF and Vanguard S&P 500 ETF. This structure indicates a focus on equity investments, with both funds providing exposure to large-cap US stocks. A common benchmark for balanced portfolios often includes a mix of equities and bonds, which this portfolio lacks. To enhance diversification, consider introducing fixed-income securities or alternative asset classes. This could help mitigate risks associated with stock market volatility, especially during downturns.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 15.3%, which is impressive compared to typical market benchmarks. However, it has also experienced a maximum drawdown of -19.06%, indicating significant volatility. While past performance is not a guarantee of future results, these figures suggest a strong growth potential but with inherent risks. To potentially stabilize returns, consider diversifying across different asset classes or geographic regions to reduce reliance on US equities alone.

Projection Info

Using Monte Carlo simulations, the portfolio's future potential was analyzed with 1,000 simulations. The median projected return is 658.69%, with all simulations showing positive outcomes. However, simulations rely on historical data, which might not predict future market conditions accurately. The wide range between the 5th and 67th percentiles suggests possible volatility. To better manage this, consider regularly reviewing and adjusting the portfolio to align with evolving market trends and personal risk tolerance.

Asset classes Info

  • Stocks
    93%
  • No data
    7%

The portfolio is heavily weighted towards stocks, making up 92.64% of the allocation, with minimal exposure to cash and unclassified assets. This concentration in equities can lead to higher returns but also increases exposure to market fluctuations. A more balanced asset allocation, including bonds or real assets, could provide a buffer against volatility. Aligning asset class weights with common benchmarks could enhance stability and potentially improve long-term returns.

Sectors Info

  • Technology
    27%
  • Financials
    13%
  • Health Care
    12%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Consumer Staples
    8%
  • Telecommunications
    7%
  • Utilities
    4%
  • Energy
    3%
  • Real Estate
    3%
  • Basic Materials
    2%

The sector allocation shows a significant concentration in technology (26.53%), followed by financial services and healthcare. Such concentration can lead to higher volatility, especially if these sectors face downturns. Diversified sector exposure, including underrepresented areas like basic materials or real estate, could improve resilience against sector-specific risks. Regularly reviewing sector weights and adjusting them to reflect broader economic trends could optimize performance.

Regions Info

  • North America
    98%
  • Europe Developed
    1%

The portfolio is predominantly invested in North America, with over 98% exposure, leaving minimal allocation to Europe and Asia. This geographic concentration can limit diversification benefits and expose the portfolio to region-specific risks. Including more international equities could enhance diversification and capture growth opportunities in emerging markets. Balancing geographic exposure with global benchmarks can help mitigate risks associated with regional economic 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 benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio for a given set of assets. By adjusting the allocation between the existing ETFs, it's possible to achieve a more efficient portfolio. However, this approach doesn't necessarily improve diversification or other investment goals. Regularly reassessing the portfolio's efficiency can help maintain alignment with personal risk tolerance and market conditions.

Dividends Info

  • JPMorgan Equity Premium Income ETF 7.30%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 4.25%

The portfolio boasts a healthy total dividend yield of 4.25%, primarily driven by the JPMorgan Equity Premium Income ETF. Dividends can provide a steady income stream and enhance total returns, especially in low-growth environments. For investors seeking income, maintaining or increasing exposure to high-dividend assets could be beneficial. However, it's crucial to balance this with growth-oriented investments to ensure long-term capital appreciation.

Ongoing product costs Info

  • JPMorgan Equity Premium Income ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.19%

The portfolio's total expense ratio (TER) is 0.19%, which is relatively low and advantageous for long-term performance. Lower costs mean more of your returns are retained, enhancing compounding effects. While the JPMorgan ETF has a higher fee, its strong dividend yield may justify this cost. Continuously evaluating fund expenses and considering lower-cost alternatives can further optimize net returns without compromising on investment quality.

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