A balanced portfolio with concentrated exposure to U.S. equities and low diversification

Report created on Mar 7, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards three ETFs: Schwab U.S. Dividend Equity ETF (39.06%), SPDR® Portfolio S&P 500 ETF (37.22%), and Invesco NASDAQ 100 ETF (23.73%). This composition results in a significant concentration in U.S. equities. While this structure supports a focus on potentially stable and high-return investments, it also limits diversification, increasing exposure to domestic market fluctuations. To enhance diversification, consider integrating assets from different regions or asset classes, such as bonds or international stocks, to mitigate risk and potentially improve the risk-return balance.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 13.91%, with a maximum drawdown of -23.01%. This indicates strong growth potential, albeit with significant volatility during downturns. Compared to typical benchmarks, this performance suggests a commendable return given the risk profile. However, past performance is not a guarantee of future results, and the portfolio's concentration in U.S. equities could lead to similar volatility in future market downturns. Diversifying into less correlated assets could help manage risk while maintaining growth potential.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. The 5th percentile shows a 92.4% return, while the 50th and 67th percentiles show 503.2% and 732.4% respectively. Although simulations indicate a high probability of positive returns, with 998 out of 1,000 simulations ending positively, it's important to note that these projections are not guarantees. Real-world market conditions can vary, and diversifying the portfolio may help cushion against unexpected economic shifts, potentially leading to more stable outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely invested in equities, resulting in a lack of diversification across asset classes. This singular focus on stocks can lead to heightened risk during market downturns, as there are no bonds or alternative investments to balance the volatility. By introducing other asset classes, such as fixed income or real estate, the portfolio could potentially achieve a better risk-return balance. This would align with a more diversified benchmark, which typically includes a mix of asset classes to reduce risk.

Sectors Info

  • Technology
    29%
  • Financials
    12%
  • Health Care
    12%
  • Consumer Discretionary
    12%
  • Telecommunications
    9%
  • Consumer Staples
    9%
  • Industrials
    8%
  • Energy
    6%
  • Basic Materials
    2%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio has significant exposure to the technology sector at 29%, followed by financial services, healthcare, and consumer cyclicals at 12% each. This sectoral concentration, particularly in technology, could lead to higher volatility, especially during periods of interest rate changes or tech sector corrections. Diversifying into underrepresented sectors, such as utilities or real estate, could provide more stability and align the portfolio more closely with broader market benchmarks, which typically have a more balanced sector distribution.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

With 99% of assets allocated to North America, the portfolio is heavily concentrated in the U.S. market, limiting exposure to international opportunities. This geographic concentration can increase vulnerability to U.S.-specific economic risks. To enhance global diversification and potentially reduce risk, consider increasing exposure to developed and emerging markets in Europe, Asia, and Latin America. This strategy can provide access to different economic cycles and growth opportunities outside the U.S.

Market capitalization Info

  • Large-cap
    44%
  • Mega-cap
    32%
  • Mid-cap
    21%
  • Small-cap
    2%
  • Micro-cap
    1%

The portfolio is primarily invested in large-cap stocks, with 44% in big caps and 32% in mega caps. This focus can provide stability and steady growth, as larger companies tend to be more resilient during economic fluctuations. However, the limited exposure to small and micro-cap stocks, which comprise only 3% of the portfolio, may restrict potential high-growth opportunities. Balancing the portfolio with a mix of small and mid-cap stocks could enhance growth potential and diversification.

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 identifies the best possible risk-return ratio. This approach considers the current assets and suggests allocation changes to maximize returns for a given level of risk. While optimizing for efficiency can enhance performance, it's important to balance this with other objectives, such as diversification and income generation. Adjustments should be made carefully, considering the investor's goals and risk tolerance.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Schwab U.S. Dividend Equity ETF 3.50%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • Weighted yield (per year) 1.99%

The portfolio benefits from a combined dividend yield of 1.99%, primarily driven by the Schwab U.S. Dividend Equity ETF, which offers a 3.50% yield. Dividends can provide a steady income stream, enhancing total returns and cushioning against market volatility. For investors seeking income, maintaining or increasing the allocation to high-yielding assets could be beneficial. However, it's crucial to balance the pursuit of dividends with the need for growth and diversification to ensure long-term portfolio health.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, which supports better long-term performance by minimizing costs. Lower costs mean more of the portfolio's returns are retained, boosting overall growth. This cost efficiency is a significant advantage and aligns well with best practices for portfolio management. Regularly reviewing and maintaining low-cost investments can continue to enhance the portfolio's net returns, ensuring that costs do not erode potential gains.

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