Value25 Portfolio
Portfolio Overview
The Value25 Portfolio is an investment solution designed to meet client needs with a moderate to aggressive risk tolerance. Our portfolio is crafted to focus on equities with a value slant, targeting investments in companies with attractive dividend yields. This strategy is ideal for investors seeking a blend of growth potential and income generation.
Details
The Value25 Portfolio selects the top 25 companies within the S&P 500 with a dividend yield of over 2%. Our approach invests in well-established companies that offer consistent returns through dividends. By focusing on these high-yielding stocks, the Value25 Portfolio aims to provide a stable income stream while also capitalizing on the growth potential of value stocks.
Key Benefits
Stable Companies: Companies in this basket tend to be mature with stable growth and balance sheets that aim for longevity with less monthly volatility than growth-oriented companies.
High Dividend Yield: Focus on companies offering a dividend yield greater than 2%.
Market Capitalization Weighting: Investments are weighted based on each company's market capitalization, providing balanced exposure.
Monthly Rebalancing: The portfolio is rebalanced monthly to ensure optimal performance and alignment with market conditions.
Tax Loss Harvesting Opportunities: By investing in individual securities, our team is able to perform tax loss harvesting within the strategy during times of market volatility.
Results
Compared to passive benchmarks, the Value25 Portfolio has demonstrated consistent results, showcasing its ability to generate steady income while capturing market growth. Historical data indicates consistent performance, highlighting the portfolio’s potential to outperform standard market benchmarks in various economic conditions (such as a pandemic, rising inflation & interest rates, and economic slowdown and recovery) over the backtested time frame. *See Disclosures below.
Performance
The following graph and table compare the Value25 Portfolio to our passive investment holdings and illustrate the strength of performance backtested from January 2018 to December 2023. The table below shows the estimated value at the end of the period of each portfolio type if $100,000 were invested on January 1, 2018.
Risk Comparison
From the table above, the Value25 Portfolio outperformed across many risk metrics compared to even the most aggressive benchmark. The stand-out risk measures are the Sharpe and Sortino Ratios—these measure returns on a risk-adjusted basis, meaning the higher the number, the better the portfolio's performance relative to the risk taken. The Sharpe Ratio evaluates return per unit of total risk, while the Sortino Ratio focuses on downside risk, providing a more nuanced view of performance by considering only negative volatility.
Additionally, while the Value25 portfolio is comprised of 100% U.S. equities, its correlation to the market is generally lower than that of aggressive or moderate passive portfolios, which include international equities and bonds. A lower correlation can help reduce overall portfolio risk and smooth out returns, especially during market volatility.
Methodology
The Value25 Portfolio employs a systematic and disciplined investment selection and portfolio management approach. The portfolio consists of the top 25 companies in the S&P 500, selected based on their dividend yields exceeding 2%. Each investment within the portfolio is weighted according to its market capitalization.
The results were calculated using publicly available price, market capitalization, dividend, and share count information from Yahoo Finance. In instances where market capitalization was unavailable, the market capitalization was estimated using the latest price multiplied by the number of shares outstanding during the period. All data provided on Yahoo Finance is provided for informational purposes only, and is not intended for trading or investing purposes.
Each month, the holdings were identified by selecting companies in the S&P500 with dividend yields greater than 2%. The dividend yield was calculated by dividing the sum of the trailing 12-month dividends per share by the current price per share.
The portfolio was rebalanced on the first of each month, and investment weights were adjusted based on the weighted market cap for the top of the month. Any dividend distributions from companies held during the month of holding are included in the portfolio's net performance. Results shown are net of fees, assuming a 0.08% annual fee (0.00667% monthly).
Disclosures
All data provided on Yahoo Finance is provided for informational purposes only and is not intended for trading or investing purposes.
Past results are not indicative of future performance, and results are net of management fees (0.80% annually) and transaction fees.
Performance was obtained through hypothetical or back-tested strategies that did not result from actual trading, and there is no market risk involved in the results.
“Results” are hypothetical and often created with the benefit of hindsight, and it may be difficult, if not impossible, to account for all of the factors that might have affected our decision-making process.
Hypothetical or back-tested performance often involves certain material assumptions in applying investment decisions that might have been made based on the investment methodology espoused during the relevant historical period, and the data set chosen may not be indicative of present or future market conditions.
There are often sharp differences between hypothetical performance results and actual returns subsequently achieved. Due to the benefit of hindsight, hypothetical performance almost invariably shows attractive returns, while actual results going forward may be less attractive.
DiversiFi Capital may discuss and display charts, graphs, and formulas that are not intended to be used by themselves to determine which securities to buy or sell or when to buy or sell them. Such charts and graphs offer limited information and should not be used alone to make investment decisions.
The data presented are purely hypothetical examples only and do not represent actual clients or results. These studies are provided for educational purposes only. Similar, or even positive results, cannot be guaranteed. Each client has their own unique set of circumstances, and some products and strategies may not be suitable for all people. Please consult with your financial advisor before implementing any strategy discussed herein.
The timeframe used for backtesting is between January 2018 and December 2023 due to various economic conditions, such as a pandemic, rising inflation and interest rates, and economic slowdown and recovery.