A balanced U.S.-centric portfolio with a focus on large-cap equities and moderate international exposure

Report created on Feb 3, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards U.S. equities, with 80% in the Schwab Total Stock Market Index Fund and 20% in the Schwab International Index Fund. This composition leans towards a strong domestic focus, which aligns with the client's U.S. base. While this provides a solid foundation in a familiar market, it may limit exposure to global opportunities. To enhance diversification, consider increasing the international allocation or adding other asset classes like bonds or alternative investments.

Growth Info

The historical performance of this portfolio shows a robust CAGR of 12.11%, indicating strong growth over time. However, it also experienced a significant maximum drawdown of -34.61%, highlighting potential volatility. Compared to benchmarks, this performance suggests a well-managed fund selection, but the drawdown underscores the importance of risk management strategies. To mitigate future downturns, consider a more diversified asset allocation or incorporating defensive assets.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns. The 50th percentile projects a 250.1% end portfolio value, with a 10.69% annualized return. While these projections are promising, it's crucial to remember that they are based on historical trends and not guaranteed. To manage expectations, regularly review and adjust the portfolio to align with changing market conditions and personal goals.

Asset classes Info

  • Stocks
    100%

The portfolio is currently 100% allocated to stocks, lacking diversification across other asset classes like bonds or cash. While equities offer growth potential, this lack of diversification can increase risk during market downturns. Comparing to a balanced benchmark, which typically includes bonds, your portfolio may benefit from introducing fixed-income assets to stabilize returns and reduce volatility.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

The sector allocation is technology-heavy at 27%, followed by financial services and healthcare. This concentration in tech could lead to higher volatility, especially during interest rate hikes or regulatory changes. While the sector mix aligns with common benchmarks, consider balancing exposure by increasing allocations to less volatile sectors like utilities or consumer defensive to mitigate risks associated with sector-specific downturns.

Regions Info

  • North America
    80%
  • Europe Developed
    13%
  • Japan
    5%
  • Australasia
    2%
  • Asia Developed
    1%

The geographic allocation is predominantly North American at 80%, with limited exposure to Europe and other regions. This U.S.-centric focus may miss out on growth opportunities in emerging markets or developed regions outside North America. To enhance global diversification, consider increasing allocations to underrepresented regions, which can also help hedge against U.S. market-specific risks.

Market capitalization Info

  • Mega-cap
    43%
  • Large-cap
    32%
  • Mid-cap
    18%
  • Small-cap
    5%
  • Micro-cap
    2%

The portfolio favors large-cap stocks, with 43% in mega caps and 32% in big caps. This focus on larger companies offers stability and lower risk compared to smaller caps, which can be more volatile. However, including a higher proportion of small and medium caps could capture additional growth potential. Balancing market cap exposure can provide a blend of stability and opportunity for higher 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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. Given the current asset mix, adjusting allocations between existing funds may enhance efficiency. However, this optimization focuses on maximizing returns for a given risk level, not necessarily achieving broader diversification. Regularly reassess to ensure alignment with overall investment goals.

Dividends Info

  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 3.10%
  • Weighted yield (per year) 0.62%

The portfolio's dividend yield is modest at 0.62%, with the international fund contributing a higher yield of 3.10%. Dividends can offer a steady income stream and enhance total returns, particularly in volatile markets. For investors seeking income, consider increasing exposure to dividend-paying stocks or funds, which can also provide some downside protection.

Ongoing product costs Info

  • SCHWAB INTERNATIONAL INDEX FUND SELECT SHARES 0.06%
  • SCHWAB TOTAL STOCK MARKET INDEX FUND SELECT SHARES 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a total expense ratio of just 0.04%. This cost efficiency supports better long-term performance by minimizing the drag on returns. Maintaining low costs is crucial, so continue to monitor and compare fund expenses to ensure they remain competitive, especially if considering new investments or changes in allocation.

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