Balanced Portfolio with Strong Diversification and Moderate Risk for Long-Term Growth and Stability

Report created on Nov 18, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio comprises a blend of ETFs, with a strong emphasis on U.S. equities, which make up the majority of the investments. The largest positions are in the Vanguard Total Stock Market and S&P 500 ETFs, providing broad market exposure. The inclusion of international stocks and sector-specific ETFs adds diversity. A small allocation to gold and real estate ETFs introduces alternative asset classes. This composition suggests a focus on growth with some level of risk management. It's important to evaluate how well this mix aligns with long-term investment objectives and risk tolerance.

Growth Info

Historically, this portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 14.33%. However, it has also experienced significant drawdowns, with a maximum of -33.62%. This indicates high volatility, typical for equity-heavy portfolios. The 31 days that make up 90% of returns highlight the portfolio's sensitivity to market timing. Understanding these dynamics is crucial for setting realistic expectations. It's advisable to maintain a long-term perspective to potentially benefit from the market's upward trajectory while being prepared for short-term fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method provides a range of possible outcomes based on historical data and volatility. The median (50th percentile) projection suggests a substantial growth of 375.12%, while the 5th percentile indicates a more conservative estimate of 58.76%. With 987 simulations showing positive returns, the annualized return across all simulations is 13.25%. This suggests a favorable outlook, but it's essential to remain aware of the inherent uncertainties and continue to assess risk tolerance.

Asset classes Info

  • Stocks
    98%
  • Other
    1%
  • Real Estate
    1%

The asset allocation is heavily skewed towards stocks, accounting for over 97% of the portfolio. This concentration in equities suggests a focus on growth, which can lead to high returns but also increased volatility. The inclusion of real estate and a small cash position adds a degree of diversification. It's crucial to assess whether this allocation aligns with the desired risk level and investment horizon. For those seeking to mitigate risk, incorporating more fixed income or alternative assets could be beneficial.

Sectors Info

  • Technology
    26%
  • Financials
    14%
  • Consumer Discretionary
    10%
  • Health Care
    10%
  • Industrials
    9%
  • Consumer Staples
    9%
  • Telecommunications
    8%
  • Energy
    4%
  • Real Estate
    3%
  • Basic Materials
    3%
  • Utilities
    3%

The sector allocation is diverse, with a significant focus on technology, financial services, and consumer cyclicals. This reflects a growth-oriented strategy, as these sectors have historically driven market performance. However, this concentration also introduces sector-specific risks. While the portfolio covers a broad range of industries, it's essential to monitor sector performance and adjust allocations if necessary to maintain a balanced risk profile. Consider the potential impact of economic cycles on sector performance and adjust accordingly.

Regions Info

  • North America
    80%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly invested in North America, comprising over 80% of the allocation. This heavy regional bias provides exposure to the U.S. market's growth potential but also limits diversification. The remaining allocation includes developed Europe, emerging Asia, and other regions, which introduces some international exposure. While this geographic distribution supports growth, it may benefit from increased diversification. Expanding investments in underrepresented regions could enhance the portfolio's resilience against regional economic shifts.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation
  • Vanguard Total International Stock Index Fund ETF Shares
    Vanguard International High Dividend Yield Index Fund ETF Shares
    High correlation

The portfolio includes several highly correlated assets, particularly within the U.S. equity segment. The Vanguard Total Stock Market and S&P 500 ETFs, as well as international stock ETFs, show strong correlations. This overlap can reduce diversification benefits, as these assets tend to move in tandem. To optimize the portfolio, consider reducing redundancy by selecting complementary assets that offer diversification. This approach can help mitigate risk and improve overall portfolio stability, especially during volatile market conditions.

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.

Before optimizing, focus on reducing asset overlap to enhance diversification. This can be done by eliminating highly correlated assets. Moving along the efficient frontier allows for risk adjustment; increasing fixed income allocations can create a more conservative portfolio, while adding equities can increase risk. Prioritize aligning the portfolio with personal financial goals and risk appetite before making changes. Regularly review and adjust the portfolio to maintain the desired balance, considering both market conditions and personal circumstances.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.30%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.80%
  • Vanguard Real Estate Index Fund ETF Shares 3.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Vanguard International High Dividend Yield Index Fund ETF Shares 4.50%
  • Consumer Staples Select Sector SPDR® Fund 2.50%
  • Weighted yield (per year) 1.68%

The portfolio's dividend yield stands at 1.68%, with contributions from various ETFs, notably the Vanguard International High Dividend Yield Index Fund and Schwab U.S. Dividend Equity ETF. This yield provides a modest income stream, which can be appealing for investors seeking regular cash flow. While dividends enhance total returns, it's essential to balance income generation with growth potential. Consider reinvesting dividends to capitalize on compounding benefits, or adjust allocations if income needs change over time.

Ongoing product costs Info

  • SPDR® Gold Shares 0.40%
  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Vanguard International High Dividend Yield Index Fund ETF Shares 0.22%
  • Consumer Staples Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is relatively low at 0.06%, reflecting the cost-effectiveness of the selected ETFs. Low costs are advantageous as they preserve more of the investment returns. However, it's crucial to remain vigilant about any changes in expense ratios or fund fees. Keeping investment costs low is a fundamental principle for maximizing returns over time. Regularly review fund expenses and consider cost-effective alternatives if necessary to maintain portfolio efficiency.

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