A balanced portfolio with strong growth potential and moderate risk exposure
Report created on Jan 8, 2025Risk profile
4/7
Diversification profile
1/5
Positions
-
VU Vanguard Growth Index Fund ETF Shares
VUG - US9229087369 50.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 25.00% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 25.00%
The portfolio is composed of three ETFs: Vanguard Growth Index Fund (50%), Vanguard Total Bond Market Index Fund (25%), and Schwab U.S. Dividend Equity ETF (25%). This allocation reflects a growth-focused approach, with a significant portion in equities. Compared to common benchmarks, such as a 60/40 stock-bond mix, this portfolio leans more towards equities, which can offer higher growth potential but also increase risk. To enhance diversification, consider adding more asset classes or funds that cover different sectors or regions.
Growth
Historically, the portfolio has demonstrated strong performance with a Compound Annual Growth Rate (CAGR) of 11.82%. This suggests that, if you had invested a hypothetical $10,000, it would have grown significantly over time. The max drawdown of -28.05% indicates potential volatility, which is common in equity-heavy portfolios. While past performance is not indicative of future results, these figures show that the portfolio has navigated market ups and downs effectively compared to benchmarks.
Projection
Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential portfolio values. With 1,000 simulations, the median outcome projects a 259.63% increase, while the worst-case scenario still shows a positive return. This indicates a high likelihood of achieving positive returns, though it is essential to remember that these projections are based on historical data and cannot guarantee future performance. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions.
Asset classes
- Stocks 75%
- Bonds 25%
- Cash 1%
The asset allocation primarily includes stocks (74.68%) and bonds (24.62%), with minimal cash holdings. This mix provides a balanced approach, offering growth through equities and stability through bonds. Compared to typical balanced portfolios, this allocation is slightly more aggressive due to the higher equity exposure. To enhance diversification, consider incorporating other asset classes like real estate or commodities, which can provide additional risk mitigation and return opportunities.
Sectors
- Technology 27%
- Consumer Discretionary 10%
- Financials 8%
- Telecommunications 8%
- Health Care 7%
- Industrials 5%
- Consumer Staples 4%
- Energy 4%
- Basic Materials 1%
- Real Estate 1%
The portfolio is heavily concentrated in the technology sector (27.30%), followed by consumer cyclicals and financial services. Such sector concentration can lead to higher volatility, especially if specific sectors underperform. This allocation aligns with current market trends but could benefit from more sectoral diversity to reduce risk. Consider evaluating sector weights and potentially increasing exposure to underrepresented sectors, such as utilities or real estate, to achieve a more balanced sector distribution.
Regions
- North America 75%
Geographically, the portfolio is predominantly invested in North America (74.81%), with minimal exposure to other regions. This concentration may limit diversification benefits and increase vulnerability to regional economic fluctuations. Expanding geographic exposure to include more developed and emerging markets can enhance diversification and capture growth opportunities in other regions. Consider adding funds that target international markets to balance the geographic composition.
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 can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio with the current assets. This involves adjusting asset weights to achieve a more efficient allocation. While this approach does not necessarily improve diversification, it can enhance returns relative to risk. Consider consulting with a financial advisor to explore potential optimization strategies and ensure the portfolio aligns with your risk tolerance and investment goals.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.70%
- Schwab U.S. Dividend Equity ETF 3.60%
- Vanguard Growth Index Fund ETF Shares 0.50%
- Weighted yield (per year) 2.08%
The portfolio's dividend yield stands at 2.08%, with the Schwab U.S. Dividend Equity ETF contributing significantly. Dividends offer a steady income stream, which can be appealing for investors seeking regular cash flow. While the yield is moderate, reinvesting dividends can enhance long-term growth. Evaluate the role of dividends in your investment strategy and consider adjusting allocations to balance income generation with growth potential.
Ongoing product costs
- Vanguard Total Bond Market Index Fund ETF Shares 0.03%
- Schwab U.S. Dividend Equity ETF 0.06%
- Vanguard Growth Index Fund ETF Shares 0.04%
- Weighted costs total (per year) 0.04%
The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance. Lower costs mean more of your returns are retained, enhancing compounding effects over time. This aligns well with best practices for cost-efficient investing. Continue monitoring expense ratios and consider replacing any higher-cost funds with similar lower-cost alternatives to maintain this advantage.
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