A balanced portfolio with strong tech exposure and low-cost ETFs for moderate growth
Report created on Jan 9, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 70.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00% -
VG Vanguard Information Technology Index Fund ETF Shares
VGT - US92204A7028 10.00%
The portfolio is composed of three ETFs, with a significant 70% allocation to Vanguard Total Stock Market Index Fund ETF Shares, 20% to Vanguard Total International Stock Index Fund ETF Shares, and 10% to Vanguard Information Technology Index Fund ETF Shares. This structure leans heavily towards equities, aligning with a balanced risk profile. Compared to common benchmarks, this allocation favors U.S. stocks and tech, which can drive growth but may increase volatility. Consider diversifying further across different asset classes to mitigate potential risks and enhance stability.
Growth
Historically, the portfolio has demonstrated a strong CAGR of 13.08%, indicating robust growth over time. However, the maximum drawdown of -34.3% highlights potential volatility during market downturns. Compared to benchmarks, this performance is impressive, reflecting the strength of the U.S. stock market and technology sector. It's crucial to remember that past performance doesn't guarantee future results, but maintaining a diversified approach can help manage risk during turbulent periods.
Projection
Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 453.75%. The simulations, which use historical data to predict future performance, suggest a high probability of positive returns, with 983 out of 1,000 simulations ending positively. While these projections offer valuable insights, they are not foolproof. It's important to regularly review and adjust the portfolio to align with changing market conditions and personal investment goals.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is heavily weighted towards stocks, comprising over 99% of the total allocation. This concentration in equities can offer significant growth potential but also introduces higher volatility. Compared to balanced benchmarks, which often include bonds or other fixed-income assets, this portfolio may benefit from incorporating additional asset classes. Adding bonds or alternative investments can help reduce risk and provide more consistent returns over time.
Sectors
- Technology 34%
- Financials 14%
- Health Care 10%
- Consumer Discretionary 9%
- Industrials 9%
- Telecommunications 7%
- Consumer Staples 5%
- Energy 3%
- Basic Materials 3%
- Real Estate 3%
- Utilities 2%
Sector allocation is tech-heavy, with a 34% exposure to technology, followed by financial services and healthcare. This concentration in technology could lead to higher volatility, especially during periods of interest rate changes or regulatory shifts. While the sector composition aligns with current market trends, consider balancing exposure by investing in underrepresented sectors like utilities or real estate to enhance diversification and reduce sector-specific risks.
Regions
- North America 81%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
The portfolio's geographic exposure is predominantly in North America at 81%, with limited diversification across other regions. This heavy U.S. focus can lead to concentrated risk, especially if the U.S. market underperforms. Compared to global benchmarks, there's room to enhance geographic diversification by increasing exposure to emerging markets or underrepresented regions like Latin America or Africa/Middle East, which can offer growth opportunities and reduce regional risk.
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 is well-positioned on the Efficient Frontier, suggesting a favorable risk-return ratio given the current asset allocation. This optimization means that the portfolio is achieving the best possible returns for its level of risk. While this is a positive indicator, it's important to periodically reassess and rebalance the portfolio to maintain this efficiency. Adjustments may be necessary as market conditions change or personal circumstances evolve.
Dividends
- Vanguard Information Technology Index Fund ETF Shares 0.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Vanguard Total International Stock Index Fund ETF Shares 3.40%
- Weighted yield (per year) 1.65%
The portfolio's dividend yield is 1.65%, with contributions from all ETFs, particularly the Vanguard Total International Stock Index Fund ETF Shares at 3.4%. Dividends can provide a stable income stream and enhance total returns, especially in volatile markets. For investors seeking income, consider increasing exposure to high-dividend sectors or funds. However, balancing growth and income is key to maintaining the portfolio's overall strategy and meeting long-term objectives.
Ongoing product costs
- Vanguard Information Technology Index Fund ETF Shares 0.10%
- 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 portfolio's costs are impressively low, with a total expense ratio (TER) of 0.05%. This aligns well with best practices for minimizing fees, which can significantly improve long-term returns. Low costs are beneficial as they help retain more of the portfolio's gains. While the current cost structure is efficient, regularly reviewing and comparing fees with similar products can ensure continued cost-effectiveness and optimize returns over time.
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