A balanced portfolio with strong US focus and tech sector concentration

Report created on Dec 28, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of three ETFs, with a heavy emphasis on stocks. The Vanguard Total Stock Market Index Fund ETF Shares makes up 65% of the portfolio, providing broad exposure to the US market. The Vanguard Total International Stock Index Fund ETF Shares accounts for 25%, offering international diversification. The remaining 10% is in the Vanguard Information Technology Index Fund ETF Shares, concentrating on the tech sector. This composition aligns with a balanced profile but leans heavily towards equities. Consider reviewing the asset allocation to ensure it aligns with your risk tolerance and financial goals.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 12.66%. This growth rate indicates strong returns over time, especially when compared to typical market benchmarks. However, it’s important to note the maximum drawdown of -34.2%, which highlights the potential for significant losses during market downturns. While past performance can provide insights, it does not guarantee future results. Regularly reviewing performance and adjusting the portfolio as needed can help manage risk and capitalize on opportunities.

Projection Info

The forward projection uses a Monte Carlo simulation, which runs 1,000 scenarios to predict potential outcomes based on historical data. This method provides a range of potential returns, with a 50th percentile projection of 483.73%. The simulation suggests a high likelihood of positive returns, with 990 out of 1,000 scenarios ending positively. However, remember that these projections are not guarantees and should be viewed as one of many tools in decision-making. Continually reassess your portfolio in light of changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, accounting for over 99% of the allocation. This concentration in a single asset class can lead to higher volatility, especially during market downturns. Stocks generally offer higher returns over the long term, but they also come with increased risk. Consider diversifying into other asset classes, such as bonds or alternative investments, to potentially reduce risk and enhance stability. Balancing asset classes can help smooth returns over time and align with a balanced risk profile.

Sectors Info

  • Technology
    33%
  • Financials
    14%
  • Health Care
    10%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

The sector allocation shows a significant concentration in technology, which makes up over 33% of the portfolio. While this sector has driven strong returns historically, it may also introduce higher volatility, particularly during periods of economic uncertainty or rising interest rates. Other sectors like financial services and healthcare provide some balance, but consider diversifying further to mitigate sector-specific risks. A more evenly distributed sector allocation can enhance resilience against sector downturns and contribute to long-term stability.

Regions Info

  • North America
    77%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio is primarily concentrated in North America, with 76.6% of assets allocated there. This focus provides exposure to the US market, known for its stability and growth potential. However, it limits exposure to other regions, which may offer different growth opportunities and risk profiles. Consider increasing allocations in emerging markets or other developed regions to enhance geographic diversification. A broader geographic spread can help mitigate risks specific to any one region and capture global growth opportunities.

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 can be optimized using the Efficient Frontier, which involves adjusting asset weights to achieve the best possible risk-return ratio. This method doesn’t necessarily mean adding new assets but rather reallocating existing ones. By exploring different combinations, you can potentially enhance returns for a given level of risk. Regularly reassess your portfolio’s efficiency to ensure it remains aligned with your financial goals and risk tolerance. Optimization is an ongoing process that adapts to changing market conditions and personal circumstances.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.66%

The portfolio’s total dividend yield is 1.66%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield of 3.3%. Dividends provide a steady income stream and can contribute significantly to total returns over time. They are particularly beneficial for investors seeking income or looking to reinvest dividends for compounding growth. Consider maintaining or increasing exposure to high-dividend assets to enhance income generation, especially if income is a key component of your investment strategy.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • 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) 0.05%

The portfolio’s total expense ratio (TER) is impressively low at 0.05%, which is beneficial for long-term performance. Lower costs mean more of your returns are retained, compounding over time. Vanguard ETFs are known for their cost-effectiveness, and this portfolio benefits from their low fees. Continue to monitor costs and consider replacing any higher-fee assets with similar, lower-cost options if they arise. Keeping expenses low is a key factor in maximizing net returns over the long haul.

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