A balanced portfolio with a focus on US stocks and moderate international exposure

Report created on Jan 5, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is predominantly composed of equity, with a significant 70% allocation to the Vanguard Total Stock Market Index Fund ETF. Bonds make up 20%, providing a cushion against market volatility, while a smaller 10% is dedicated to international stocks. This composition aligns with a balanced investment strategy, aiming for growth while mitigating risk with fixed-income assets. To enhance diversification further, consider adding more asset classes, such as real estate or commodities, which can offer additional stability and growth potential.

Growth Info

Historically, the portfolio has demonstrated a solid performance with a Compound Annual Growth Rate (CAGR) of 10.41%. This indicates strong growth over time, though it's important to note the maximum drawdown of nearly 30%, reflecting potential volatility. When compared to a typical balanced benchmark, the portfolio's performance is commendable. However, past performance does not guarantee future returns, so it's crucial to remain vigilant and adaptable to market changes.

Projection Info

Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio shows a median return of 144.31% over the investment horizon. While 943 out of 1,000 simulations resulted in positive returns, it's essential to remember that these projections are not predictions. They provide a range of potential outcomes, emphasizing the uncertainty inherent in investing. To manage expectations, regularly review projections and adjust strategies as needed.

Asset classes Info

  • Stocks
    80%
  • Bonds
    20%
  • Cash
    1%

The portfolio is heavily weighted towards stocks (nearly 80%), with bonds accounting for about 20%. This allocation reflects a growth-oriented strategy typical of balanced portfolios. However, the lack of significant exposure to other asset classes, such as real estate or alternative investments, may limit diversification benefits. To align more closely with diversified benchmarks, consider introducing a broader range of asset classes to mitigate risk and enhance potential returns.

Sectors Info

  • Technology
    23%
  • Financials
    11%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    2%

Sector allocation shows a concentration in technology (22.85%), which can drive growth but may also increase volatility. Financial services and healthcare are also prominent, providing balance. Compared to typical benchmarks, this sector distribution is fairly aligned, though the high tech exposure could pose risks during interest rate hikes. To manage sector-specific risks, consider diversifying further into underrepresented areas like utilities or consumer staples, which can offer stability.

Regions Info

  • North America
    70%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

The portfolio is predominantly exposed to North America, with over 70% allocation, reflecting a strong home bias. While this can benefit from local market knowledge, it limits global diversification. European and Asian markets are underrepresented compared to global benchmarks. To enhance geographic diversification and potentially tap into emerging market growth, consider increasing exposure to these regions, balancing risk and opportunity.

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 potentially be optimized using the Efficient Frontier, a concept that helps identify the best possible risk-return trade-off. By adjusting the current asset allocations, it may be possible to achieve a more favorable risk-return ratio. However, this optimization focuses on the existing assets and does not necessarily imply further diversification. Regularly review and adjust allocations to maintain this balance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.99%

With a total dividend yield of 1.99%, the portfolio provides a moderate income stream. The bond ETF contributes significantly with a 3.7% yield, offering stability. For investors seeking higher income, consider increasing allocations to high-dividend-paying assets. However, balance is key, as chasing yield can introduce additional risk. Regularly review dividend strategies to ensure they align with income goals and risk tolerance.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • 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) 0.04%

The portfolio's total expense ratio (TER) of 0.04% is impressively low, supporting better long-term performance by minimizing costs. This efficient cost structure is a strong alignment with best practices, as lower fees can significantly enhance net returns over time. Continue monitoring expense ratios and seek opportunities to reduce costs further, ensuring that the portfolio remains cost-effective and competitive.

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