A balanced portfolio with strong U.S. focus and low-cost diversification strategy

Report created on Feb 13, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is composed of 60% Schwab U.S. Broad Market ETF, 20% Schwab International Equity ETF, and 20% Schwab U.S. Aggregate Bond ETF. This structure leans heavily on U.S. equities while maintaining a moderate allocation to international stocks and bonds. Compared to a typical balanced benchmark, the U.S. equity weight is on the higher side. This composition aims to balance growth potential with income stability, offering a solid foundation for diversification. Consider whether this allocation aligns with your long-term goals and risk tolerance, and adjust as needed for greater exposure to other regions or asset classes.

Growth Info

Historically, this portfolio has delivered a Compound Annual Growth Rate (CAGR) of 10.22%, which is robust for a balanced strategy. The maximum drawdown of -29.72% indicates vulnerability during market downturns, though this is typical for equity-heavy portfolios. Compared to benchmarks, the performance is commendable, showcasing resilience and growth. However, remember that past performance doesn't guarantee future results. To mitigate potential drawdowns, consider diversifying further into non-correlated assets or increasing bond allocation, if it aligns with your risk tolerance.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a median growth of 171.2% over the investment horizon. With 965 out of 1,000 simulations yielding positive returns, the outlook appears favorable. However, projections are inherently uncertain and should be viewed as one of many tools in decision-making. To enhance potential returns, consider periodic rebalancing and staying informed about macroeconomic trends that could impact asset performance.

Asset classes Info

  • Stocks
    80%
  • Bonds
    20%

The portfolio consists of 80% stocks and 20% bonds, reflecting a growth-oriented approach with some income stability. This allocation is typical for moderately aggressive investors seeking higher returns over the long term. Compared to benchmarks, the stock allocation is slightly higher, which may increase volatility but also potential returns. To improve diversification, consider adding alternative asset classes like real estate or commodities, which can provide additional risk mitigation.

Sectors Info

  • Technology
    21%
  • Financials
    13%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Health Care
    8%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation reveals a technology-heavy focus at 21%, followed by financial services at 13% and consumer cyclicals at 9%. This sector distribution aligns closely with global benchmarks, indicating a well-balanced approach. However, tech-heavy portfolios might experience higher volatility during periods of interest rate hikes. To manage sector risks, regularly review sector performance and consider rebalancing if any sector becomes disproportionately large compared to your risk tolerance.

Regions Info

  • North America
    62%
  • Europe Developed
    11%
  • Japan
    4%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America at 62%, with limited exposure to other regions. This concentration aligns with many U.S.-centric benchmarks but may limit diversification benefits. By increasing allocations to underrepresented regions like emerging markets, you can mitigate regional risks and potentially capture growth opportunities abroad. Consider whether this geographic exposure aligns with your long-term view and risk appetite.

Market capitalization Info

  • Mega-cap
    34%
  • Large-cap
    26%
  • Mid-cap
    15%
  • Small-cap
    4%
  • Micro-cap
    1%

The portfolio's market capitalization distribution shows a preference for mega-cap stocks at 34%, followed by big caps at 26%. This is typical for broad market ETFs and provides stability, as larger companies tend to be less volatile. However, the lower allocation to small and micro-cap stocks could limit growth potential. Consider whether increasing exposure to smaller companies aligns with your risk tolerance, as they can offer higher returns but come with increased volatility.

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's current asset allocation is near the Efficient Frontier, indicating a well-balanced risk-return profile. The Efficient Frontier represents the best possible risk-return ratio achievable with current assets. While the portfolio is optimized for current holdings, consider periodic rebalancing to maintain this efficiency, especially as market conditions change. This ensures your portfolio continues to meet your investment objectives without taking on unnecessary risk.

Dividends Info

  • Schwab U.S. Broad Market ETF 0.90%
  • Schwab International Equity ETF 1.80%
  • Schwab U.S. Aggregate Bond ETF 4.30%
  • Weighted yield (per year) 1.76%

The portfolio's overall dividend yield is 1.76%, with the Schwab U.S. Aggregate Bond ETF contributing the most at 4.30%. Dividends are a valuable source of income and can enhance total returns, especially for income-focused investors. However, the relatively low yield from equities suggests a focus on growth rather than income. If income generation is a priority, consider increasing exposure to higher-yielding stocks or dividend-focused ETFs.

Ongoing product costs Info

  • Schwab U.S. Broad Market ETF 0.03%
  • Schwab International Equity ETF 0.06%
  • Schwab U.S. Aggregate Bond ETF 0.03%
  • Weighted costs total (per year) 0.04%

The total expense ratio (TER) of the portfolio is impressively low at 0.04%, which is a significant advantage for long-term performance. Low costs mean more of your money is working for you, compounding over time. This aligns well with best practices for cost-efficient investing. To maintain this advantage, regularly review fund expenses and consider switching to lower-cost alternatives if fees increase or if better options become available.

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