Moderately Diversified Cautious Portfolio with High Correlation and Strong Historical Performance

Report created on Dec 2, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of a variety of ETFs, with a strong focus on equities, particularly in the U.S. market. The largest holding is the Vanguard S&P 500 ETF at 20.6%, followed by the Vanguard Total Stock Market Index Fund ETF Shares at 16.77%. The inclusion of the US Treasury 12 Month Bill ETF adds a conservative touch with 11.87% of the portfolio. This composition suggests a balance between growth and stability, with a cautious risk profile. The diversified nature of the portfolio aims to mitigate risks while capturing market gains.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 17.97%. This indicates strong growth over time, despite a maximum drawdown of -9.83%, which shows it can withstand market volatility. The fact that 90% of returns were achieved in just 21 days highlights the importance of staying invested through market fluctuations. This performance suggests that the portfolio's composition has been effective in capturing market upswings while limiting downside risk.

Projection Info

Using a Monte-Carlo simulation, which models potential future returns based on historical data, the portfolio shows promising projections. With a hypothetical initial investment, the simulations indicate a 5th percentile return of 388.62% and a 50th percentile return of 984.75%. The annualized return across all simulations is 18.89%, suggesting robust potential for future growth. This indicates that the portfolio is well-positioned to continue delivering strong returns, although it's essential to be mindful of potential risks.

Asset classes Info

  • Stocks
    88%
  • Bonds
    12%

The portfolio primarily consists of stocks, making up 87.79% of the total allocation, with bonds contributing 11.87%. This allocation reflects a focus on growth, with a conservative element provided by bonds. The limited exposure to cash and other asset classes suggests a commitment to remaining fully invested. This asset class distribution aligns with the portfolio's cautious risk classification, balancing growth potential with some degree of safety.

Sectors Info

  • Technology
    22%
  • Financials
    13%
  • Health Care
    10%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    3%
  • Basic Materials
    3%

The portfolio is diversified across multiple sectors, with the largest allocations in Technology (22.18%), Financial Services (13.16%), and Healthcare (9.82%). This sector allocation suggests a focus on growth industries, while also maintaining exposure to more stable sectors like Consumer Defensive (5.52%) and Utilities (3.28%). Such diversification helps spread risk across various economic sectors, potentially reducing the impact of sector-specific downturns.

Regions Info

  • North America
    80%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily weighted towards North America, with 80.16% of assets allocated there. This reflects a strong focus on the U.S. market, which is known for its liquidity and growth opportunities. While there is some exposure to international markets, such as Europe Developed (3.57%) and Asia Emerging (1.32%), the portfolio remains predominantly U.S.-centric. This geographic composition aligns with the cautious risk profile, prioritizing stability and familiarity.

Redundant positions Info

  • Vanguard Small-Cap Index Fund ETF Shares
    Vanguard Mid-Cap Index Fund ETF Shares
    High correlation
  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation
  • Vanguard High Dividend Yield Index Fund ETF Shares
    Vanguard Value Index Fund ETF Shares
    High correlation

Within the portfolio, there are several highly correlated asset groups, such as the Vanguard Small-Cap Index Fund ETF Shares and Vanguard Mid-Cap Index Fund ETF Shares. These correlations suggest that certain assets may move in tandem, potentially reducing diversification benefits. While such correlations can enhance returns during market upswings, they may also amplify risks during downturns. Monitoring these correlations can help optimize the portfolio's risk-return profile.

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 overlapping, highly correlated assets that don't enhance diversification. By doing so, you can potentially improve the portfolio's efficiency. Moving along the efficient frontier allows for adjustments in risk and return profiles, enabling a shift towards a riskier or more conservative stance. This approach ensures that the portfolio remains aligned with your financial goals and risk tolerance while seeking to enhance returns.

Dividends Info

  • US Treasury 12 Month Bill ETF 4.30%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Value Index Fund ETF Shares 2.20%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.89%

The portfolio's overall dividend yield is 1.89%, with contributions from various ETFs. The US Treasury 12 Month Bill ETF offers the highest yield at 4.3%, providing a reliable income stream. The Vanguard High Dividend Yield Index Fund ETF Shares also contribute significantly with a 2.7% yield. This dividend income can enhance total returns, offering a buffer during market volatility. Maintaining a focus on dividend-paying assets can support long-term growth and income objectives.

Ongoing product costs Info

  • US Treasury 12 Month Bill ETF 0.15%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.06%

The total expense ratio (TER) of the portfolio is 0.06%, reflecting a cost-efficient investment strategy. The low costs associated with the Vanguard ETFs, such as the Vanguard S&P 500 ETF at 0.03%, help maximize net returns. Keeping costs low is crucial for long-term investment success, as high fees can erode returns over time. The portfolio's cost structure aligns with best practices for maintaining efficient and effective investment management.

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