A balanced portfolio with a strong emphasis on US equities and minimal international exposure

Report created on Dec 27, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

This portfolio is heavily weighted towards US equities, with nearly 83% in stock funds, primarily through the Fidelity 500 Index Fund and Vanguard Total Stock Market Index Fund ETF. The remaining allocation includes a significant portion in a government money market fund, providing liquidity and stability. Compared to common benchmarks, this composition leans heavily towards equities, which can be beneficial for growth but may lack diversification. Consider incorporating more diverse asset classes to enhance risk management and potential returns.

Growth Info

Historically, the portfolio has achieved a CAGR of 11.78%, indicating robust growth. However, it experienced a maximum drawdown of -30.66%, reflecting vulnerability during market downturns. This performance is comparable to major equity indices, suggesting alignment with broader market trends. While past performance is not indicative of future results, it highlights the potential for substantial returns alongside significant volatility. Diversifying into less correlated assets could mitigate drawdowns in the future.

Projection Info

Monte Carlo simulations, using historical data, project a wide range of potential outcomes for this portfolio. With an annualized return of 10.5% across simulations, there is a good chance of achieving positive returns. However, the 5th percentile projects a modest gain of 25.1%, while the 67th percentile shows a substantial 360.74% increase. These projections emphasize the uncertainty inherent in investing and the importance of diversification to buffer against less favorable scenarios.

Asset classes Info

  • Stocks
    83%
  • No data
    17%

The portfolio's asset class allocation is predominantly in stocks, with a minor allocation in cash. This heavy equity focus can drive growth but also increases exposure to market volatility. Compared to typical balanced portfolios, which might include bonds or real estate, this one is less diversified. Introducing additional asset classes could provide stability and reduce risk, particularly during equity market downturns, aligning better with a balanced investment strategy.

Sectors Info

  • Technology
    27%
  • No data
    17%
  • Financials
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Industrials
    7%
  • Consumer Discretionary
    6%
  • Consumer Staples
    5%
  • Energy
    3%
  • Consumer Discretionary
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector-wise, the portfolio is concentrated in technology, financial services, and healthcare. This composition aligns with many benchmarks but may expose the portfolio to sector-specific risks, particularly if tech experiences volatility. While the diverse sector representation is a strength, consider balancing exposure to cyclical and defensive sectors to mitigate potential downturns. This strategy can enhance resilience against economic shifts and sector-specific challenges.

Regions Info

  • North America
    82%
  • No data
    17%
  • Europe Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with minimal exposure to international markets. This concentration limits diversification benefits and exposes the portfolio to US-specific risks. Compared to global benchmarks, which often include more international exposure, this allocation may miss growth opportunities abroad. Expanding geographic diversification could reduce risk and capture potential growth in emerging and developed markets outside the US.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Fidelity 500 Index Fund
    VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL PLUS SHARES
    High correlation

The portfolio contains highly correlated assets, particularly among its US equity holdings. This correlation means these assets tend to move together, limiting diversification benefits during market downturns. While correlation can enhance returns in rising markets, it poses a risk when markets decline. Reducing overlap by incorporating less correlated assets can improve diversification, providing a buffer against market volatility and enhancing risk-adjusted returns.

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 approach, which aims to achieve the best risk-return ratio. By adjusting allocations among current assets, the portfolio could potentially improve its efficiency. However, this optimization focuses solely on existing holdings and does not address diversification through new asset classes. Balancing risk and return while considering diversification is essential for achieving overall portfolio efficiency.

Dividends Info

  • Fidelity 500 Index Fund 1.20%
  • Fidelity® Government Money Market Fund 4.90%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL PLUS SHARES 0.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.81%

The portfolio's dividend yield stands at 1.81%, with contributions from various funds. This yield is relatively modest but provides a steady income stream, which can be reinvested for compounding growth. For investors seeking income, focusing on higher-yielding assets might be beneficial. However, balancing dividend income with growth potential is key to maintaining a well-rounded portfolio that meets both income and capital appreciation goals.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • VANGUARD INSTITUTIONAL INDEX FUND INSTITUTIONAL PLUS SHARES 0.02%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.02%

The portfolio's total expense ratio (TER) is impressively low at 0.02%, with individual fund costs ranging from 0.02% to 0.08%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Low costs are a significant advantage, allowing more of the portfolio's returns to compound over time. Maintaining this cost structure while potentially exploring other low-cost options can further enhance investment outcomes.

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