A well-diversified balanced portfolio with moderate risk and attractive dividend yields

Report created on Dec 22, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed mainly of equity funds, with a significant portion allocated to dividend-focused investments. Notably, the JPMorgan Equity Income Fund Class R6 holds the largest share at 20%. This composition aligns with a balanced investment strategy, offering both growth and income potential. Compared to common benchmarks, this portfolio leans heavily on equity, which could increase volatility. Consider diversifying further into bonds or alternative assets to mitigate risk and stabilize returns over time, especially if market conditions become unfavorable.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 12.67%. This performance is impressive, especially considering the maximum drawdown of 20.16%, which indicates resilience during downturns. In comparison to broad market benchmarks, the returns are competitive, suggesting effective asset selection. However, past performance does not guarantee future results. To maintain or improve this performance, consider regular rebalancing to adapt to changing market conditions and ensure alignment with long-term goals.

Projection Info

Forward projections using Monte Carlo simulations show a positive outlook, with a median expected return of 390.57%. This analysis uses historical data to simulate a range of potential future outcomes, providing insight into risk and return expectations. However, it's essential to remember that these projections are not guarantees. They assume historical trends will continue, which may not be the case. To enhance future performance, consider stress-testing the portfolio against various economic scenarios to better prepare for potential market shifts.

Asset classes Info

  • Stocks
    79%
  • Cash
    3%
  • Bonds
    2%

The portfolio is heavily weighted towards stocks, comprising approximately 79% of the total allocation. This high equity exposure can drive growth but may also increase volatility. Compared to typical balanced portfolios, this allocation is equity-heavy. To improve diversification, consider increasing exposure to bonds or other asset classes like commodities or real estate. This adjustment can provide a buffer against stock market fluctuations and offer more consistent returns, particularly during periods of market instability.

Sectors Info

  • Financials
    14%
  • Technology
    13%
  • Industrials
    11%
  • Health Care
    9%
  • Real Estate
    8%
  • Consumer Discretionary
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Utilities
    3%
  • Telecommunications
    3%
  • Basic Materials
    3%

Sector allocation is diverse, with significant investments in financial services and technology, each representing over 12% of the portfolio. This balance aligns closely with global benchmarks, suggesting effective diversification. However, the portfolio's reliance on sectors like technology could lead to increased volatility, especially during economic downturns or interest rate hikes. To mitigate this risk, consider reallocating to more defensive sectors like consumer staples or utilities, which may offer stability during volatile periods.

Regions Info

  • North America
    64%
  • Europe Developed
    8%
  • No data
    5%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, which accounts for nearly 64% of the allocation. This concentration could limit exposure to growth opportunities in other regions. Compared to global benchmarks, the portfolio underweights emerging markets and developed regions outside North America. To enhance diversification and potentially capture higher growth rates, consider increasing exposure to international markets, particularly in Asia and Europe, which may offer different risk-return profiles.

Redundant positions Info

  • STATE STREET EQUITY 500 INDEX FUND CLASS K
    Fidelity Freedom Index 2065 Fund Premier Class
    High correlation

The portfolio contains highly correlated assets, particularly between the State Street Equity 500 Index Fund Class K and the Fidelity Freedom Index 2065 Fund Premier Class. High correlation means these assets tend to move together, which can reduce diversification benefits. During market downturns, this could amplify losses. To improve diversification, consider replacing one of these funds with an asset that has a lower correlation to the rest of the portfolio, thereby enhancing overall risk management.

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, which suggests a more efficient allocation with an expected return of 15.53% at the same risk level. This optimization involves adjusting current asset weights to achieve the best possible risk-return ratio. However, it requires careful consideration of transaction costs and tax implications. Before making changes, assess how these adjustments align with your overall investment strategy and long-term goals, ensuring that the portfolio remains diversified and risk-appropriate.

Dividends Info

  • BlackRock International Index Fund Cls K 0.30%
  • DFA Commodity Strategy I 1.30%
  • Fidelity Freedom Index 2065 Fund Premier Class 1.70%
  • JPMORGAN EQUITY INCOME FUND CLASS R6 8.40%
  • T. ROWE PRICE DIVIDEND GROWTH FUND INC. T. ROWE PRICE DIVIDEND GROWTH FUND-I CLASS 4.80%
  • REAL ESTATE SECURITIES FUND R-6 2.60%
  • STATE STREET EQUITY 500 INDEX FUND CLASS K 1.20%
  • VANGUARD EMERGING MARKETS STOCK INDEX FUND ADMIRAL SHARES 0.70%
  • VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES 1.10%
  • VANGUARD SMALL-CAP VALUE INDEX FUND ADMIRAL SHARES 1.40%
  • Weighted yield (per year) 3.22%

The portfolio's total dividend yield stands at 3.22%, with the JPMorgan Equity Income Fund contributing significantly at 8.4%. Dividends are a vital component of total returns, providing income and compounding growth. For investors seeking income, this yield is attractive compared to typical equity portfolios. However, focusing too heavily on high-yield assets can introduce risks if dividend sustainability becomes an issue. Regularly review the financial health of dividend-paying investments to ensure they continue to meet income objectives.

Ongoing product costs Info

  • BlackRock International Index Fund Cls K 0.05%
  • DFA Commodity Strategy I 0.32%
  • JPMORGAN EQUITY INCOME FUND CLASS R6 0.45%
  • T. ROWE PRICE DIVIDEND GROWTH FUND INC. T. ROWE PRICE DIVIDEND GROWTH FUND-I CLASS 0.51%
  • REAL ESTATE SECURITIES FUND R-6 0.81%
  • STATE STREET EQUITY 500 INDEX FUND CLASS K 0.02%
  • VANGUARD EMERGING MARKETS STOCK INDEX FUND ADMIRAL SHARES 0.14%
  • VANGUARD MID-CAP INDEX FUND ADMIRAL SHARES 0.05%
  • VANGUARD SMALL-CAP VALUE INDEX FUND ADMIRAL SHARES 0.07%
  • Weighted costs total (per year) 0.25%

The portfolio's total expense ratio (TER) is 0.25%, which is relatively low and beneficial for long-term performance. Low costs mean more of your investment returns are retained, compounding over time. This cost efficiency aligns well with best practices in portfolio management. However, it's essential to remain vigilant about fees, as they can erode returns. Periodically review the expense ratios of all holdings and explore opportunities to switch to lower-cost funds if available, without sacrificing performance.

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