Balanced Portfolio with Strong US Focus and Moderate Diversification for Risk-Averse Investors

Report created on Nov 10, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of a diverse array of ETFs, primarily centered on US equities and bonds. With 64.97% in stocks and 34.91% in bonds, it leans towards equities, offering a balanced approach between growth and income. This composition aligns with a moderate risk tolerance, providing exposure to both growth opportunities and income-generating assets. The presence of both large-cap and small-cap ETFs ensures coverage across different market capitalizations, while the inclusion of municipal and aggregate bond ETFs adds a layer of fixed income stability. To enhance diversification, consider adding more international exposure or alternative asset classes.

Growth Info

Historically, the portfolio has demonstrated a solid performance with a CAGR of 10.61%. This indicates a strong growth trajectory over time, although the maximum drawdown of -24.35% suggests significant volatility during downturns. The portfolio's performance is concentrated, with 90% of returns generated over just 23 days, highlighting the importance of staying invested through market fluctuations. While past performance is not indicative of future results, maintaining a long-term perspective can help capitalize on the portfolio's growth potential. To mitigate volatility, consider diversifying further into less correlated assets or sectors.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a median projected return of 288.15% over the investment horizon. This statistical method assesses potential future outcomes based on historical data, providing a range of possible returns. The high number of simulations with positive returns (973 out of 1,000) suggests a favorable outlook, but it's important to remember that market conditions can change. To optimize future performance, regularly review asset allocations and consider adjustments that align with evolving financial goals and risk tolerance.

Asset classes Info

  • Stocks
    65%
  • Bonds
    35%

The portfolio is predominantly invested in stocks and bonds, with minimal allocations to cash and other asset classes. This allocation reflects a balanced investment strategy, aiming for both capital appreciation and income generation. Stocks provide growth potential, while bonds offer stability and income. This mix is suitable for investors seeking moderate risk and steady returns. To enhance diversification, explore opportunities in alternative investments or sectors that may offer uncorrelated returns. Regularly reviewing asset class allocations ensures alignment with investment objectives and risk tolerance.

Sectors Info

  • Technology
    14%
  • Health Care
    11%
  • Financials
    10%
  • Industrials
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    4%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation within the portfolio is concentrated, with a significant emphasis on technology (14.06%) and healthcare (10.73%). These sectors have historically driven growth, but reliance on a few sectors can increase vulnerability to sector-specific risks. The portfolio's sector diversity is moderate, with several sectors having less than 2% allocation. To reduce risk, consider increasing exposure to underrepresented sectors, which can provide a buffer against sector-specific downturns. A more balanced sector allocation can enhance the portfolio's resilience and potential for long-term growth.

Regions Info

  • North America
    56%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic composition is heavily weighted towards North America (56.16%), providing strong exposure to the US market. While this focus can capitalize on the stability and growth of the US economy, it may limit diversification benefits. Limited exposure to regions like Europe, Asia, and emerging markets suggests potential vulnerability to regional economic shifts. To enhance geographic diversification, consider increasing allocations to international markets, which can offer growth opportunities and reduce reliance on a single region. This approach can help manage geopolitical risks and currency fluctuations.

Redundant positions Info

  • SPDR S&P 500 ETF Trust
    Invesco QQQ Trust
    SPDR® Portfolio S&P 500 Growth ETF
    iShares Core S&P Mid-Cap ETF
    Invesco S&P 500® Equal Weight ETF
    SPDR® Portfolio S&P 500 Value ETF
    SPDR Russell Small Cap Completeness
    iShares Core S&P Small-Cap ETF
    iShares Core S&P 500 ETF
    SPDR® Portfolio S&P 500 ETF
    iShares Core Dividend Growth ETF
    High correlation
  • iShares Core MSCI EAFE ETF
    SPDR S&P World ex US
    High correlation
  • iShares Core MSCI Emerging Markets ETF
    SPDR® Portfolio Emerging Markets ETF
    High correlation

The portfolio contains several highly correlated assets, particularly among US equity ETFs. This correlation means that these assets tend to move in the same direction, reducing diversification benefits. While correlated assets can amplify gains in a rising market, they also increase exposure to downturns. To improve diversification, consider reducing overlap by selecting ETFs with different underlying indices or sectors. This can help manage risk and enhance the portfolio's resilience to market volatility. A well-diversified portfolio should balance correlated and uncorrelated assets.

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 the overlap of highly correlated assets, which currently limit diversification benefits. Streamlining the portfolio can enhance efficiency without increasing risk. Moving along the efficient frontier allows for adjustments towards a riskier or more conservative portfolio. To achieve this, consider reallocating funds to less correlated or underrepresented assets. This approach can improve the risk-return profile, aligning the portfolio with desired risk levels. Regularly review and adjust allocations to maintain an optimal balance between risk and return.

Dividends Info

  • iShares Core U.S. Aggregate Bond ETF 3.60%
  • PIMCO Active Bond Exchange-Traded Fund 5.50%
  • iShares Core Dividend Growth ETF 2.10%
  • Fidelity® MSCI Health Care Index ETF 1.40%
  • iShares Core MSCI EAFE ETF 3.10%
  • iShares Core MSCI Emerging Markets ETF 2.70%
  • iShares Core S&P Mid-Cap ETF 1.20%
  • iShares Core S&P Small-Cap ETF 1.20%
  • iShares Core S&P 500 ETF 1.20%
  • Eli Lilly and Company 0.50%
  • IQ MacKay Municipal Intermediate ETF 3.80%
  • iShares National Muni Bond ETF 2.90%
  • Invesco QQQ Trust 0.60%
  • Invesco S&P 500® Equal Weight ETF 1.40%
  • SPDR S&P World ex US 2.70%
  • SPDR® Portfolio Emerging Markets ETF 2.50%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • SPDR Russell Small Cap Completeness 1.30%
  • SPDR S&P 500 ETF Trust 1.20%
  • SPDR® Portfolio S&P 500 Growth ETF 0.60%
  • SPDR® Portfolio S&P 500 Value ETF 1.90%
  • SPDR® DoubleLine Total Return Tactical ETF 5.10%
  • First Trust TCW Unconstrained Plus Bond ETF 4.60%
  • Vanguard Long-Term Treasury Index Fund ETF Shares 4.00%
  • Weighted yield (per year) 2.38%

The portfolio offers a total dividend yield of 2.38%, with contributions from various bond and equity ETFs. This yield provides a steady income stream, appealing to investors seeking regular cash flow. Higher-yielding bond ETFs, such as the PIMCO Active Bond ETF (5.5%) and DoubleLine Total Return Tactical ETF (5.1%), contribute significantly to this yield. While dividends enhance income, it's important to balance yield with growth potential. Consider reinvesting dividends to compound returns over time, or explore opportunities to increase yield without compromising diversification.

Ongoing product costs Info

  • iShares Core U.S. Aggregate Bond ETF 0.03%
  • PIMCO Active Bond Exchange-Traded Fund 0.58%
  • iShares Core Dividend Growth ETF 0.08%
  • Fidelity® MSCI Health Care Index ETF 0.08%
  • iShares Core MSCI EAFE ETF 0.07%
  • iShares Core MSCI Emerging Markets ETF 0.09%
  • iShares Core S&P Mid-Cap ETF 0.05%
  • iShares Core S&P Small-Cap ETF 0.06%
  • iShares Core S&P 500 ETF 0.03%
  • IQ MacKay Municipal Intermediate ETF 0.31%
  • iShares National Muni Bond ETF 0.05%
  • Invesco QQQ Trust 0.20%
  • Invesco S&P 500® Equal Weight ETF 0.20%
  • SPDR S&P World ex US 0.03%
  • SPDR® Portfolio Emerging Markets ETF 0.07%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • SPDR Russell Small Cap Completeness 0.03%
  • SPDR S&P 500 ETF Trust 0.10%
  • SPDR® Portfolio S&P 500 Growth ETF 0.04%
  • SPDR® Portfolio S&P 500 Value ETF 0.04%
  • SPDR® DoubleLine Total Return Tactical ETF 0.55%
  • First Trust TCW Unconstrained Plus Bond ETF 0.85%
  • Vanguard Long-Term Treasury Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.14%

Portfolio costs are relatively low, with a total expense ratio (TER) of 0.14%. Low costs contribute to higher net returns, making this portfolio cost-effective for investors. The majority of ETFs in the portfolio have low expense ratios, with some exceptions like the PIMCO Active Bond ETF at 0.58%. Keeping costs low is crucial for long-term investment success. Regularly review and compare expense ratios to ensure cost efficiency. Consider replacing higher-cost funds with similar lower-cost alternatives to maximize returns without increasing risk.

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