Balanced Portfolio with Strong U.S. Focus and Moderate Risk, Broad Diversification but Overlapping Growth Exposure

Report created on Jul 6, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio comprises four ETFs, with a notable focus on U.S. equities. The largest allocation goes to the Vanguard Total Stock Market Index Fund ETF, making up 35% of the portfolio. Schwab U.S. Large-Cap Growth ETF and Schwab U.S. Dividend Equity ETF follow, with 30% and 20% allocations, respectively. The remaining 15% is allocated to the Vanguard Total International Stock Index Fund ETF. This composition reflects a balanced approach, with a significant tilt towards domestic equities, offering broad market exposure.

Growth Info

The historical performance of this portfolio is impressive, with a compound annual growth rate (CAGR) of 13.66%. Despite a maximum drawdown of 33.5%, the portfolio has shown resilience, recovering well over time. The concentration of returns in just 34 days highlights the importance of staying invested during volatile periods. This performance indicates a strong potential for growth, albeit with some level of risk due to the drawdowns experienced.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, this portfolio's future performance was projected. Assuming a hypothetical initial investment, the simulation estimates a 5th percentile return of 58.32% and a 67th percentile return of 572.78%. The median projected return stands at 414.83%, with an annualized return of 13.66%. This analysis suggests a wide range of potential outcomes, emphasizing the importance of maintaining a diversified and balanced approach to mitigate risks.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards equities, with 99.67% of assets in stocks. This high equity allocation suggests a growth-oriented strategy, which can offer significant returns but also comes with increased volatility. The minimal allocation to cash and other asset classes indicates a focus on maximizing returns. To manage risk, consider introducing a small allocation to fixed-income assets, which can provide stability and reduce volatility in the portfolio.

Sectors Info

  • Technology
    29%
  • Financials
    14%
  • Health Care
    12%
  • Consumer Discretionary
    11%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is diverse, with the technology sector leading at 29.34%, followed by financial services and healthcare. This distribution provides exposure to various economic segments, but the heavy weighting in technology could increase vulnerability to sector-specific risks. Balancing sector exposure can help mitigate these risks and ensure that the portfolio is not overly reliant on any single industry. A more evenly distributed sector allocation can enhance resilience during market fluctuations.

Regions Info

  • North America
    86%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographic allocation shows a strong focus on North America, accounting for 85.81% of the portfolio. This concentration in the U.S. market reflects a home-country bias, which can be beneficial given the robust performance of U.S. equities. However, it also limits exposure to international markets, which can offer diversification benefits and reduce overall portfolio risk. Consider increasing allocations to other regions to capture growth opportunities worldwide and enhance diversification.

Redundant positions Info

  • Schwab U.S. Large-Cap Growth ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation between Schwab U.S. Large-Cap Growth ETF and Vanguard Total Stock Market Index Fund ETF Shares. This correlation suggests overlapping exposures that may not provide optimal diversification benefits. Reducing correlated assets can enhance diversification, potentially improving risk-adjusted returns. Assessing and adjusting the portfolio to minimize overlapping exposures can lead to a more efficient allocation of resources.

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 overlapping assets like Schwab U.S. Large-Cap Growth ETF and Vanguard Total Stock Market Index Fund ETF Shares. This will enhance diversification and reduce unnecessary risk. To achieve a riskier portfolio, increase allocations to growth-oriented assets. Conversely, for a more conservative approach, consider adding fixed-income securities. Moving along the efficient frontier can help balance risk and return, tailoring the portfolio to specific goals.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.64%

The portfolio's dividend yield stands at 1.64%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.3%. This income generation component provides a moderate level of cash flow, which can be reinvested to compound returns or used to meet income needs. To enhance income potential, consider increasing exposure to dividend-paying assets. Balancing growth and income strategies can provide a stable return profile while still capturing growth opportunities.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • 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) 0.05%

The total expense ratio (TER) of the portfolio is 0.05%, which is quite low and favorable for long-term investors. This low-cost structure is beneficial as it maximizes net returns by minimizing the drag from fees. Keeping costs low is crucial for enhancing overall portfolio performance. Continue to monitor expense ratios and seek opportunities to reduce costs further without compromising the quality of investments. Cost efficiency should remain a priority in portfolio management.

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