Balanced Portfolio with Low Costs and High Diversification Ideal for Moderate Risk Investors

Report created on Nov 13, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three ETFs: Vanguard Total Stock Market Index Fund (60%), Vanguard Total International Stock Index Fund (30%), and Vanguard Total Bond Market Index Fund (10%). This composition indicates a strong focus on equities, with a smaller allocation to bonds, providing a balanced approach. The high diversification across these funds helps spread risk and potentially enhance returns. To maintain this balance, consider periodically rebalancing the portfolio to align with your target allocation, especially after significant market movements.

Growth Info

Historically, this portfolio has shown a commendable compound annual growth rate (CAGR) of 10.2%, with a maximum drawdown of -32.1%. This performance suggests a robust return potential, albeit with some volatility. Understanding these metrics is crucial as they highlight the portfolio's ability to recover from downturns and generate returns over time. To enhance future performance, it may be beneficial to regularly review the portfolio's allocation to ensure it remains aligned with your long-term financial goals.

Projection Info

Using a Monte Carlo simulation with 1,000 scenarios, the portfolio's future performance was analyzed. This method models potential outcomes by simulating random variables. For a hypothetical initial investment, the median (50th percentile) scenario projects a 145.85% return, with an annualized return of 7.56%. While 940 simulations resulted in positive returns, it's important to remember that projections are inherently uncertain. Continually monitoring the portfolio's performance and adjusting as needed can help navigate potential market fluctuations.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio is predominantly invested in stocks (89.42%) and bonds (9.89%), with minimal allocations to cash and other assets. This asset class distribution aligns with a balanced investment strategy, offering growth potential through equities and stability via bonds. It's crucial to understand that the stock-heavy allocation may lead to higher volatility. To manage risk, consider maintaining a diversified bond component and periodically reassessing your risk tolerance to ensure this asset mix remains appropriate.

Sectors Info

  • Technology
    22%
  • Financials
    14%
  • Industrials
    10%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation is diversified, with technology (22.36%), financial services (14.24%), and industrials (9.86%) being the largest holdings. This broad sector exposure helps mitigate the impact of sector-specific downturns on the portfolio's overall performance. Understanding sector allocation is vital as it influences the portfolio's sensitivity to economic cycles. To maintain sector balance, consider reviewing sector weights periodically and ensure they align with your investment strategy and risk tolerance.

Regions Info

  • North America
    62%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio has a strong North American focus (62.05%), with additional exposure to developed Europe (11.80%) and emerging Asia (4.93%). This allocation provides a mix of stability from developed markets and growth potential from emerging regions. Geographic diversification is essential in managing country-specific risks and capitalizing on global opportunities. To further enhance diversification, consider monitoring geographic weights and adjusting them according to your views on global economic trends.

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 is well-diversified and cost-efficient, suggesting little immediate need for optimization. However, to achieve a riskier or more conservative stance, consider adjusting the stock-to-bond ratio. Moving along the efficient frontier means increasing stock allocation for higher returns or boosting bonds for stability. Understanding the efficient frontier helps in aligning the portfolio with risk tolerance and financial goals. Regularly reviewing and rebalancing can ensure the portfolio remains on track to meet these objectives.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.04%

The portfolio offers a total dividend yield of 2.04%, with the Vanguard Total Bond Market Index Fund providing the highest yield at 3.6%. Dividends are a valuable component of total returns, offering a steady income stream. It's important to understand how dividends contribute to the portfolio's performance, especially during periods of market volatility. To maximize income, consider reinvesting dividends to compound returns over time, while also ensuring that the overall yield aligns with your income needs and investment strategy.

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) is a low 0.04%, indicating cost efficiency. The Vanguard ETFs included have minimal costs, with the highest being the Vanguard Total International Stock Index Fund at 0.08%. Keeping investment costs low is crucial as it directly impacts net returns. Understanding the cost structure helps ensure that more of your money is working for you. To maintain cost-effectiveness, consider regularly reviewing the TER and exploring opportunities to minimize expenses further.

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