Balanced Portfolio with Broad Diversification and Moderate Risk Suited for Growth and Income Focused Investors

Report created on Nov 24, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of a mix of ETFs and a single common stock, with a significant emphasis on equity investments. The Vanguard S&P 500 ETF and Schwab U.S. Dividend Equity ETF together make up half of the portfolio, providing a strong foundation in large-cap U.S. equities. The inclusion of emerging markets and sector-specific ETFs adds diversification. This composition reflects a balanced approach, blending growth potential with income generation. To enhance diversification further, consider adding more asset classes or reducing concentration in certain ETFs while maintaining a focus on the overall investment strategy.

Growth Info

Historically, the portfolio has delivered a solid compound annual growth rate (CAGR) of 9.7%. This performance highlights the portfolio's capacity to generate returns over time, although it has experienced a maximum drawdown of -31.75%, indicating vulnerability during market downturns. The concentration of returns in just 26 days suggests a reliance on a few high-performing periods. To mitigate risks, consider strategies to smooth out returns, such as diversifying further or implementing risk management techniques, which could help reduce the impact of market volatility on the portfolio's performance.

Projection Info

Using a Monte Carlo simulation with a hypothetical initial investment, the portfolio's future performance was projected through 1,000 simulations. The median outcome suggests a 150.55% increase in value, with an annualized return of 8.34%. However, there's a 5% chance of experiencing an 18.22% loss. This simulation underscores the portfolio's potential for growth while also highlighting inherent risks. To align with desired outcomes, consider adjusting the portfolio's asset allocation to better match personal risk tolerance and investment goals, ensuring a balance between growth opportunities and risk management.

Asset classes Info

  • Stocks
    90%
  • Cash
    6%
  • Bonds
    4%

The portfolio is predominantly invested in stocks, making up nearly 90% of the allocation, with minor holdings in bonds and cash. This heavy equity weighting is typical of a growth-oriented strategy, offering potential for higher returns but also increased volatility. For a more balanced risk profile, consider increasing exposure to bonds or other fixed-income assets. This could help stabilize returns and provide a buffer during market downturns, aligning the portfolio more closely with a moderate risk tolerance while still maintaining growth potential.

Sectors Info

  • Technology
    16%
  • Financials
    13%
  • Real Estate
    11%
  • Consumer Staples
    11%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Utilities
    7%
  • Telecommunications
    6%
  • Industrials
    6%
  • Energy
    4%
  • Basic Materials
    2%

Sector allocation is diverse, with significant stakes in technology, financial services, and real estate. This diversification across sectors helps mitigate sector-specific risks and captures opportunities across different economic segments. However, the portfolio could benefit from a more balanced sector distribution to reduce overexposure to any single sector. Consider evaluating sector performance regularly and rebalancing as needed to ensure alignment with long-term investment objectives, maintaining a diversified approach that can adapt to changing market conditions.

Regions Info

  • North America
    70%
  • Asia Emerging
    11%
  • Asia Developed
    5%
  • Africa/Middle East
    3%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, with nearly 70% allocation. While this focus aligns with a strong U.S. market presence, it limits exposure to other global markets. The inclusion of emerging markets provides some international diversification, but there's room to increase holdings in developed regions outside North America. Expanding geographic diversification can help capture growth opportunities in different regions and reduce reliance on any single market, enhancing the portfolio's resilience to regional economic fluctuations.

Redundant positions Info

  • iShares MSCI Emerging Markets ETF
    iShares MSCI Emerging Markets Min Vol Factor ETF
    High correlation
  • Vanguard S&P 500 ETF
    Schwab U.S. Dividend Equity ETF
    High correlation

Within the portfolio, certain assets show high correlation, such as the iShares MSCI Emerging Markets ETFs and the U.S.-focused ETFs like Vanguard S&P 500 and Schwab U.S. Dividend Equity. These correlations suggest overlapping exposure that may not provide additional diversification benefits. To optimize the portfolio, consider reducing positions in highly correlated assets or replacing them with investments that offer unique risk-return profiles. This could enhance diversification, improve risk-adjusted returns, and better align the portfolio with its intended investment strategy.

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.

Before optimizing, focus on reducing overlap in highly correlated assets to enhance diversification. Once streamlined, explore the efficient frontier to adjust risk levels. Moving towards a riskier portfolio involves increasing equity exposure, while a more conservative stance would involve adding bonds or cash. This approach allows for tailoring risk to individual preferences, balancing growth potential with stability. Optimization should align with personal investment goals and risk tolerance, ensuring the portfolio remains adaptable to changing financial circumstances.

Dividends Info

  • iShares MSCI Emerging Markets ETF 2.40%
  • iShares MSCI Emerging Markets Min Vol Factor ETF 2.80%
  • Realty Income Corp 5.40%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • iShares Short Treasury Bond ETF 5.10%
  • Vanguard S&P 500 ETF 1.20%
  • Consumer Staples Select Sector SPDR® Fund 2.60%
  • Utilities Select Sector SPDR® Fund 2.70%
  • Weighted yield (per year) 2.88%

The portfolio offers a respectable dividend yield of 2.88%, providing a steady income stream. Realty Income Corp and the Schwab U.S. Dividend Equity ETF contribute significantly to this yield, appealing to income-focused investors. While dividends enhance total returns, consider balancing yield with growth potential to ensure the portfolio remains aligned with long-term objectives. Reinvesting dividends can also compound returns over time, boosting the portfolio's overall performance and supporting wealth accumulation.

Ongoing product costs Info

  • iShares MSCI Emerging Markets ETF 0.70%
  • iShares MSCI Emerging Markets Min Vol Factor ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • iShares Short Treasury Bond ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Consumer Staples Select Sector SPDR® Fund 0.09%
  • Utilities Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is 0.14%, reflecting a cost-effective investment approach. Low costs are critical for maximizing net returns, as high fees can erode gains. The Vanguard S&P 500 ETF and Schwab U.S. Dividend Equity ETF offer particularly low expense ratios, contributing to the portfolio's cost efficiency. To maintain this advantage, regularly review and compare expense ratios of existing and potential investments. Keeping costs low supports the portfolio's long-term growth and aligns with prudent investment management practices.

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