Cautious Portfolio with Single-Focused Diversification and Balanced Asset Classes for Moderate Risk Tolerance

Report created on Jul 10, 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

The portfolio is composed of a mix of assets with a cautious risk profile. It includes ETFs across various sectors, with a focus on bonds and stocks. The largest positions are in bond ETFs, which account for 37% of the portfolio, indicating a focus on income and stability. Stock ETFs make up 53%, providing growth potential. The remaining 10% is in gold, adding a hedge against inflation. This composition suggests a balanced approach, suitable for those seeking moderate returns with lower risk.

Growth Info

Historically, the portfolio has delivered a solid performance, with a compound annual growth rate (CAGR) of 10.75%. Despite a maximum drawdown of 20.5%, it has shown resilience, recovering swiftly. The portfolio's ability to generate 90% of its returns over just 28 days highlights its potential for significant gains during favorable market conditions. This performance suggests that the portfolio has been well-managed and capable of weathering market volatility, making it a reliable choice for cautious investors.

Projection Info

Using a Monte Carlo simulation, which runs numerous hypothetical scenarios to predict future performance, the portfolio shows promising outcomes. With a 1,000-simulation analysis, 967 scenarios resulted in positive returns. The median projection suggests a potential growth of 295.05% over a typical investment horizon. This indicates a strong likelihood of achieving reasonable returns while maintaining a cautious approach. The simulation underscores the portfolio's potential to deliver consistent gains, aligning with a moderate risk tolerance.

Asset classes Info

  • Stocks
    53%
  • Bonds
    35%
  • Other
    10%
  • Cash
    2%

The portfolio is diversified across asset classes, with stocks making up 52.9%, bonds 35.4%, and gold 10%. This allocation reflects a balanced strategy, aiming to capture growth through equities while ensuring stability with bonds. The inclusion of gold provides an additional layer of diversification, acting as a hedge against inflation and market volatility. This mix is suitable for investors seeking a blend of income and growth, with a moderate level of risk.

Sectors Info

  • Technology
    16%
  • Consumer Staples
    12%
  • Utilities
    10%
  • Energy
    5%
  • Financials
    3%
  • Health Care
    2%
  • Industrials
    2%
  • Consumer Discretionary
    2%
  • Telecommunications
    1%

Sector allocation within the portfolio is varied, with a strong emphasis on technology, consumer staples, and utilities. Technology leads at 16.5%, offering growth potential, while consumer staples and utilities provide stability and income. The presence of energy and financial services adds further diversification. This sector mix indicates a focus on both growth and defensive industries, aligning with a cautious investment strategy that seeks to balance risk and reward.

Regions Info

  • North America
    53%

Geographically, the portfolio is heavily concentrated in North America, with 52.8% exposure. Minimal allocations to Europe, Asia, Latin America, and Africa/Middle East suggest a focus on familiar markets with stable economies. This geographic concentration aligns with a cautious investment approach, prioritizing regions with established financial systems. However, it may limit exposure to global growth opportunities. Investors seeking broader diversification might consider increasing international allocations.

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.

Portfolio optimization could enhance returns by adjusting the asset mix along the efficient frontier. To achieve a riskier profile, consider increasing equity exposure, capturing more growth potential. Conversely, a more conservative approach could involve bolstering bond holdings for added stability. However, before optimizing, ensure diversification across sectors and geographies is sufficient. Focus on maintaining the low-cost structure and balancing risk and reward to align with the investor's goals and risk appetite.

Dividends Info

  • Fidelity® MSCI Consumer Staples Index ETF 2.30%
  • Fidelity® MSCI Information Technology Index ETF 0.60%
  • Fidelity® MSCI Utilities Index ETF 2.60%
  • Global X MLP ETF 7.10%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • iShares 0-5 Year TIPS Bond ETF 2.50%
  • Vanguard Short-Term Corporate Bond Index Fund ETF Shares 3.80%
  • Weighted yield (per year) 2.43%

The portfolio offers a respectable dividend yield of 2.43%, with contributions from various ETFs. Notably, the Global X MLP ETF provides a high yield of 7.1%, while others like the Schwab U.S. Dividend Equity ETF and Vanguard Short-Term Corporate Bond Index Fund ETF Shares contribute 3.3% and 3.8%, respectively. This income generation aligns with a cautious investment strategy, providing steady cash flow while maintaining growth potential. The dividends enhance the portfolio's appeal for income-focused investors.

Ongoing product costs Info

  • Fidelity® MSCI Consumer Staples Index ETF 0.08%
  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • Fidelity® MSCI Utilities Index ETF 0.08%
  • SPDR Gold MiniShares 0.10%
  • Global X MLP ETF 0.45%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • iShares 0-5 Year TIPS Bond ETF 0.03%
  • Vanguard Short-Term Corporate Bond Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is a low 0.07%, indicating cost-effective management. With most ETFs having expense ratios under 0.1%, the portfolio minimizes costs, allowing more returns to be retained. This cost efficiency is crucial for long-term growth, as high fees can erode returns over time. For investors focused on maximizing value, the portfolio's low-cost structure is a significant advantage, ensuring that investment gains are not diminished by excessive fees.

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