Balanced Diversified Portfolio with Strong Historical Performance and Low Costs Suitable for Moderate Risk Investors

Report created on Jul 30, 2024

Risk profile Info

4/7
Balanced
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Diversification profile Info

5/5
Highly Diversified
← Less diversification More diversification →

Positions

The portfolio is composed of three Vanguard ETFs, with a significant allocation to the Vanguard Total Stock Market Index Fund ETF Shares at 70%. The Vanguard Total International Stock Index Fund ETF Shares makes up 20%, and the Vanguard Total Bond Market Index Fund ETF Shares accounts for 10%. This mix shows a strong inclination towards equities, which typically offer higher growth potential. The inclusion of bonds provides a safety net, reducing overall volatility. A balanced approach like this is ideal for investors seeking growth with some risk mitigation. Consider periodically reviewing the asset allocation to ensure it aligns with evolving financial goals.

Growth Info

Historically, the portfolio has demonstrated robust performance, achieving a compound annual growth rate (CAGR) of 11.06%. Despite a maximum drawdown of -32.27%, the portfolio has shown resilience, recovering effectively from downturns. This indicates a well-constructed portfolio capable of weathering market volatility. The days that make up 90% of returns being just 30 suggests that the portfolio benefits from long-term holding. It's crucial to maintain a long-term perspective and avoid reacting to short-term market fluctuations to maximize potential returns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation, which models potential outcomes based on historical data, indicates a median return of 142.92% and an annualized return of 7.42%. With 952 out of 1,000 simulations showing positive returns, the portfolio demonstrates a high probability of future success. This reinforces the importance of maintaining a diversified, balanced approach. Continue to monitor the portfolio's performance against these projections and adjust as necessary to stay aligned with financial goals.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%
  • Cash
    1%

The portfolio's asset classes are predominantly stocks, making up approximately 89.55%, with bonds at 9.89%. This allocation is typical for a balanced portfolio, providing growth potential through equities and stability through bonds. The small allocation to cash and other assets adds a layer of liquidity and diversification. Such a structure is beneficial for maintaining a balance between risk and return. Regularly reviewing the asset class distribution is advisable to ensure it remains in line with risk tolerance and investment objectives.

Sectors Info

  • Technology
    24%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation is diverse, with technology leading at 24.14%, followed by financial services and healthcare. This spread across sectors helps mitigate risk, as performance can vary significantly between sectors. The presence of consumer cyclicals and defensive sectors provides a balance between growth and stability. This diversity is beneficial in reducing sector-specific risks. It's important to continue monitoring sector performance and adjust allocations if any sector becomes disproportionately large, ensuring the portfolio remains well-balanced.

Regions Info

  • North America
    71%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, representing 71.22%, with smaller allocations to Europe, Asia, and other regions. This focus on North America aligns with the client's region, providing familiarity and potential tax benefits. However, it also introduces regional risk. The inclusion of international exposure helps diversify geopolitical and economic risks. Consider periodically reviewing the geographic allocation to ensure it remains balanced and aligned with global economic trends and personal risk tolerance.

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 optimization chart suggests that the portfolio is already on a relatively efficient frontier, balancing risk and return well. For those seeking a riskier profile, increasing equity exposure could enhance potential returns. Conversely, shifting more towards bonds can create a more conservative approach, reducing volatility. However, given the current balanced nature, focus on maintaining this equilibrium while keeping an eye on personal financial goals and risk tolerance. It's crucial to align any adjustments with long-term objectives and not react impulsively to market changes.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.77%

The portfolio's dividend yield stands at 1.77%, with contributions from both stock and bond ETFs. The Vanguard Total Bond Market Index Fund ETF Shares offers the highest yield at 3.3%, providing a steady income stream. Dividends can be a valuable source of passive income, particularly in volatile markets. Reinvesting dividends can enhance compounding returns over time. Regularly reviewing dividend yields and reinvestment strategies can help optimize income generation and overall portfolio growth.

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 costs are impressively low, with an overall Total Expense Ratio (TER) of 0.04%. This cost efficiency is a significant advantage, as lower fees mean more returns are retained by the investor. Vanguard's reputation for low-cost investing is evident here, making it an excellent choice for cost-conscious investors. It's important to continue monitoring expense ratios, ensuring they remain competitive. Keeping investment costs low is a crucial factor in maximizing long-term returns and achieving financial goals.

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