A cautious portfolio with strong US focus and moderate diversification offering steady returns

Report created on Jan 16, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards the SPDR® Portfolio S&P 500 ETF, comprising 54.82% of the total allocation. This is complemented by a significant 29.28% in the Fidelity® Government Money Market Fund, providing a stable cash-like component. The remaining allocation is spread between global and emerging market equities via Vanguard ETFs. Compared to typical cautious portfolios, this one leans towards a higher equity exposure, which can offer growth but also increases potential volatility. To better align with cautious risk profiles, consider increasing fixed-income or cash allocations to enhance stability.

Growth Info

Historically, the portfolio has delivered a CAGR of 9.71%, indicating robust growth over time. The max drawdown of -27.27% reflects potential risks during market downturns, highlighting the importance of risk management. Compared to benchmarks, the performance aligns well with expectations for a moderately diversified equity-focused portfolio. To mitigate drawdowns, consider incorporating more defensive assets. Remember, past performance doesn't guarantee future results, but it offers insights into how the portfolio might behave in similar conditions.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a median potential return of 177.47% over a given period. The simulations show a high likelihood of positive returns, with 941 out of 1,000 simulations indicating gains. While these projections offer a glimpse into possible future performance, they rely on past data and assumptions, meaning actual results could vary. Regularly reviewing and adjusting the portfolio based on changing market conditions is advisable to stay aligned with investment goals.

Asset classes Info

  • Stocks
    70%
  • No data
    29%

The portfolio's asset allocation is primarily in stocks, accounting for over 70% of the total. This high equity allocation is typical for a growth-oriented strategy but may not fully align with a cautious risk profile. The remaining allocation is mainly in cash-like holdings through a money market fund. Compared to benchmarks, the portfolio could benefit from more diversification across asset classes, such as bonds, to reduce volatility and provide a more consistent income stream.

Sectors Info

  • No data
    29%
  • Technology
    22%
  • Financials
    10%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Telecommunications
    6%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Basic Materials
    2%
  • Real Estate
    2%

Sector allocation reveals a concentration in technology, financial services, and consumer cyclicals. While these sectors can drive growth, they may also introduce volatility, particularly if economic conditions change. The portfolio's sector composition is fairly aligned with common benchmarks, suggesting a reasonable level of diversification. However, the significant technology exposure could lead to higher volatility during periods of rising interest rates. Consider diversifying further into defensive sectors like utilities or consumer staples for more stability.

Regions Info

  • North America
    62%
  • No data
    29%
  • Asia Emerging
    3%
  • Europe Developed
    2%
  • Asia Developed
    1%
  • Japan
    1%
  • Africa/Middle East
    1%

The portfolio has a strong geographic focus on North America, with 62.16% of assets allocated there. This concentration aligns with US-based benchmarks but limits international exposure. The remaining geographic allocation is minimal, with emerging markets and developed Europe having small percentages. To enhance diversification and reduce regional risk, consider increasing exposure to other global regions. This can help mitigate risks associated with geopolitical or economic events specific to the US.

Redundant positions Info

  • SPDR® Portfolio S&P 500 ETF
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly between the SPDR® Portfolio S&P 500 ETF and the Vanguard Total World Stock Index Fund ETF Shares. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. To enhance diversification, consider replacing one of these ETFs with assets that have lower correlation to each other, potentially reducing overall portfolio risk during market downturns.

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 potentially be optimized using the Efficient Frontier, focusing on achieving the best possible risk-return ratio with the current assets. However, before optimization, it's advisable to address the issue of overlapping, highly correlated assets, which may not contribute to diversification. By adjusting allocations among existing assets, the portfolio could achieve a more efficient balance, enhancing returns for a given level of risk.

Dividends Info

  • Fidelity® Government Money Market Fund 4.50%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 2.39%

With a total yield of 2.39%, the portfolio provides a moderate income stream, primarily driven by the Fidelity® Government Money Market Fund's 4.5% yield. Dividends can offer a steady income source, especially in volatile markets. For investors seeking income, this yield is beneficial, but there might be room to improve by exploring higher-yielding assets. Balancing income needs with growth potential is key, so consider the impact of dividend changes on overall returns.

Ongoing product costs Info

  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.02%

The portfolio boasts impressively low costs, with a total expense ratio (TER) of 0.02%. Low costs are crucial for enhancing long-term returns, as they minimize the drag on performance. Compared to industry averages, this portfolio is well-positioned to maximize returns through cost efficiency. Maintaining this low-cost structure is advantageous, but it's essential to evaluate any new investments for cost implications, ensuring they align with the current cost-effective strategy.

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