A globally diversified single ETF portfolio with balanced risk and strong historical performance
Report created on Jan 21, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VT Vanguard Total World Stock Index Fund ETF Shares
VT - US9220427424 100.00%
This portfolio is entirely composed of the Vanguard Total World Stock Index Fund ETF, which provides exposure to global equities. It has a balanced risk profile with a risk score of 4 out of 7. The single ETF structure simplifies management and offers broad diversification across sectors and regions. While this setup aligns with a globally diversified approach, it lacks exposure to fixed income or other asset classes, which could help reduce volatility during market downturns. Consider whether this equity-focused approach aligns with your risk tolerance and long-term goals.
Growth
The historical performance of this portfolio is impressive, with a compound annual growth rate (CAGR) of 10.63%. This indicates strong growth potential over time, though the max drawdown of -34.20% highlights potential volatility. Comparing this to a global equity benchmark, the performance is competitive, suggesting the ETF effectively captures market returns. However, past performance is not indicative of future results, and investors should remain aware of market fluctuations. Maintaining a long-term perspective can help weather short-term volatility and benefit from the portfolio's growth potential.
Projection
The Monte Carlo simulation projects a range of potential outcomes, indicating a median return of 287.1% and an annualized return of 11.28%. This analysis uses historical data to estimate future performance, with 978 out of 1,000 simulations showing positive returns. While these projections suggest strong potential, it's important to remember that they are based on past trends and cannot predict future market conditions with certainty. Regularly reviewing and adjusting your portfolio in response to changing market conditions can help optimize long-term returns.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio's allocation is heavily skewed towards equities, with 99% in stocks and a minimal cash position. This focus on equities offers significant growth potential but also exposes the portfolio to market volatility. Compared to a balanced benchmark, the lack of fixed income or alternative asset classes may result in higher risk during downturns. Diversifying into other asset classes could enhance stability and provide a buffer against equity market fluctuations. Consider incorporating bonds or real assets to achieve a more balanced risk-return profile.
Sectors
- Technology 25%
- Financials 17%
- Consumer Discretionary 11%
- Industrials 11%
- Health Care 10%
- Telecommunications 7%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 4%
- Real Estate 3%
- Utilities 3%
The sector allocation is well-diversified, with technology leading at 25%, followed by financial services and consumer cyclicals. This distribution aligns closely with global market trends, offering exposure to various economic sectors. However, the tech-heavy concentration may result in higher volatility during periods of interest rate changes or regulatory shifts. It's beneficial to monitor sector trends and adjust allocations if needed to maintain a balanced approach. Ensuring sector diversity can help mitigate risks associated with sector-specific downturns.
Regions
- North America 67%
- Europe Developed 14%
- Asia Emerging 6%
- Japan 6%
- Asia Developed 4%
- Australasia 2%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is primarily focused on North America, with 67% allocation, followed by Europe and Asia. This mirrors global market capitalization but may lead to overexposure to U.S. market risks. While the U.S. market has historically provided strong returns, diversifying further into emerging markets or underrepresented regions could enhance growth potential and reduce reliance on any single economy. Consider the potential benefits of increasing exposure to regions with different economic cycles and growth drivers.
Market capitalization
- Mega-cap 42%
- Large-cap 31%
- Mid-cap 19%
- Small-cap 5%
- Micro-cap 1%
The portfolio is predominantly invested in large-cap stocks, with 73% in mega and big-cap companies. This allocation provides stability and exposure to established market leaders, which can be beneficial in turbulent times. However, the limited exposure to small and micro-cap stocks might restrict potential for higher growth. Including a broader range of market capitalizations could improve diversification and capture opportunities in smaller, potentially faster-growing companies. Balancing large and small-cap exposure can enhance the portfolio's risk-return profile.
Dividends
- Vanguard Total World Stock Index Fund ETF Shares 1.90%
- Weighted yield (per year) 1.90%
The portfolio's dividend yield stands at 1.90%, which contributes to total returns. This yield is moderate compared to global benchmarks and can provide a steady income stream, especially in low-interest-rate environments. While dividends are a valuable component of total returns, they should not be the sole focus. It's essential to balance income generation with growth potential to meet long-term investment objectives. Consider reinvesting dividends to compound growth or diversifying into higher-yielding assets if income is a priority.
Ongoing product costs
- Vanguard Total World Stock Index Fund ETF Shares 0.07%
- Weighted costs total (per year) 0.07%
The portfolio's total expense ratio (TER) is an impressively low 0.07%, which supports better long-term performance by minimizing costs. This low-cost structure is a significant advantage, as fees can erode returns over time. Compared to industry averages, this TER is highly competitive, ensuring that more of your investment returns are retained. Maintaining a focus on cost efficiency is crucial, and this portfolio is well-aligned in this regard. Continue monitoring expenses and exploring cost-effective options to enhance net returns.
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