Balanced global portfolio with strong diversification and moderate risk exposure

Report created on Jan 20, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio comprises primarily equity ETFs, with a significant allocation to the Vanguard Total Stock Market Index Fund at 42%. This allocation suggests a heavy reliance on the broad U.S. market. The inclusion of international ETFs, such as the Vanguard FTSE Developed and Emerging Markets, adds global exposure. Compared to a typical balanced benchmark, the portfolio leans more towards equities, with minimal bonds at 5%. This composition suits those seeking growth but may lack the stability typically offered by higher bond allocations.

Growth Info

Historically, the portfolio has shown robust performance, with a Compound Annual Growth Rate (CAGR) of 11.47%. This growth rate indicates strong historical returns, outperforming many traditional balanced benchmarks. However, the maximum drawdown of -25.74% highlights potential volatility. The portfolio's performance is concentrated, with 90% of returns occurring over just 17 days, suggesting susceptibility to market timing. While past performance is a useful indicator, it does not guarantee future results, and investors should remain aware of potential risks.

Projection Info

The Monte Carlo simulation, using 1,000 scenarios, projects a wide range of potential outcomes. The median scenario suggests a 179.3% return, while the 5th percentile indicates a potential loss of -23.8%. This approach models future possibilities based on historical data, providing a probabilistic view of potential returns. With 901 simulations showing positive returns, the outlook is generally optimistic. However, it's crucial to remember that simulations are not foolproof; they assume past conditions will persist, which may not always be the case.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%
  • Cash
    1%

The portfolio is heavily weighted towards equities, with 94% in stocks and only 5% in bonds. This allocation reflects a growth-oriented strategy, which can offer higher returns but also increased volatility. Compared to typical balanced portfolios, which might hold around 40% in bonds, this portfolio is more aggressive. For those seeking stability, a higher bond allocation might be advisable. Balancing asset classes can help mitigate risk while still capturing growth potential, especially during market downturns.

Sectors Info

  • Technology
    22%
  • Financials
    16%
  • Consumer Discretionary
    12%
  • Industrials
    12%
  • Health Care
    7%
  • Telecommunications
    7%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio's sector allocation is diverse, with technology leading at 22%, followed by financial services and consumer cyclicals. This composition aligns well with global benchmarks, providing a balanced exposure across industries. However, tech-heavy portfolios can be more volatile, especially during interest rate hikes. Maintaining a diverse sector allocation helps manage sector-specific risks and ensures that the portfolio is not overly dependent on any single industry. This alignment with benchmarks is a positive aspect of the portfolio's structure.

Regions Info

  • North America
    64%
  • Europe Developed
    10%
  • Asia Emerging
    8%
  • Japan
    5%
  • Asia Developed
    4%
  • Africa/Middle East
    2%
  • Australasia
    1%
  • Latin America
    1%

With 64% of assets in North America, the portfolio is heavily skewed towards the U.S. market. This concentration can benefit from the stability of the U.S. economy but may limit exposure to faster-growing regions. The portfolio includes developed markets in Europe and emerging markets in Asia, adding some geographic diversification. However, increasing allocations to underrepresented regions like Latin America and Africa could enhance diversification and potentially capture higher growth opportunities from emerging markets.

Market capitalization Info

  • Mega-cap
    33%
  • Large-cap
    24%
  • Mid-cap
    19%
  • Small-cap
    13%
  • Micro-cap
    6%

The portfolio's market capitalization allocation is well-distributed, with 33% in mega-cap, 24% in big-cap, and smaller portions in medium, small, and micro-caps. This distribution provides a balanced exposure to companies of varying sizes, capturing both stability from larger firms and growth potential from smaller ones. Compared to typical benchmarks, this allocation aligns well, ensuring diversification across company sizes. Such balance can help mitigate risks associated with market cap fluctuations, offering a well-rounded investment approach.

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's current allocation can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. By adjusting the weightings among existing assets, the portfolio could potentially achieve a more favorable balance of risk and return. This optimization focuses on maximizing returns for a given level of risk, rather than increasing diversification. Investors should periodically review their portfolio's position on the Efficient Frontier to ensure it remains aligned with their risk tolerance and financial objectives.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.70%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 1.89%

The portfolio's overall dividend yield stands at 1.89%, with contributions from various ETFs. Notably, the Vanguard Extended Duration Treasury ETF offers a yield of 4.7%, enhancing income potential. For investors seeking regular income, dividends can provide a steady cash flow, supplementing capital gains. While the yield is modest compared to income-focused portfolios, it adds an element of stability. Investors should consider the role of dividends in their strategy, balancing growth and income according to their financial goals.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • Alpha Architect U.S. Quantitative Momentum ETF 0.29%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.10%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.10%, thanks to the inclusion of cost-effective Vanguard ETFs. This low cost structure supports better long-term performance by minimizing the drag on returns. Compared to industry averages, this TER is highly competitive, ensuring that more of the portfolio's gains remain in the investor's pocket. Keeping costs low is a fundamental principle of sound investing, and this portfolio is well-aligned with that practice, enhancing its overall efficiency.

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