Balanced Portfolio with Strong Diversification and Moderate Risk Offering Growth and Income Opportunities

Report created on Nov 16, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is a well-balanced mix of ETFs, with a strong emphasis on equities. It holds a 35% allocation in the Vanguard S&P 500 ETF, providing broad exposure to large-cap U.S. stocks. The inclusion of sector-specific ETFs like the Vanguard Information Technology Index Fund and the SPDR® Portfolio S&P 500 High Dividend ETF adds a layer of targeted growth and income. The portfolio also features international exposure through the Vanguard FTSE Emerging Markets and Total International Stock Index Funds, as well as a small allocation to bonds and real estate. This composition indicates a diversified approach, aimed at balancing growth potential with risk management.

Growth Info

Historically, this portfolio has shown impressive performance, with a compound annual growth rate (CAGR) of 13.09%. This suggests that a hypothetical initial investment would have grown significantly over time. The maximum drawdown of -34.39% reflects the inherent volatility of a predominantly equity-based portfolio. The fact that just 30 days account for 90% of the returns indicates a concentration of performance in short periods, common in equity markets. This historical performance suggests potential for strong returns, but also highlights the importance of being prepared for market swings.

Projection Info

Using a Monte Carlo simulation, which runs numerous scenarios to forecast potential future outcomes, the portfolio shows a promising range of possibilities. Assuming a hypothetical initial investment, the simulation predicts a median return of 293.42% and an annualized return of 11.53%. The 5th percentile outcome at 11.01% suggests a relatively low risk of loss, while the 67th percentile outcome at 404.1% indicates substantial upside potential. This forward-looking analysis underscores the portfolio's potential for growth, while reminding investors of the uncertainty and variability inherent in market investments.

Asset classes Info

  • Stocks
    89%
  • Real Estate
    5%
  • Bonds
    5%
  • Cash
    1%

The portfolio's asset class distribution is heavily weighted towards stocks, making up 89.23% of the allocation. This is complemented by a 5% allocation in real estate and a 4.94% allocation in bonds, with minimal cash holdings. This allocation reflects a growth-oriented strategy, with stocks providing the primary engine for capital appreciation. The inclusion of bonds and real estate offers some diversification, potentially reducing volatility and providing income. For a balanced risk profile, maintaining a mix of asset classes is crucial to mitigate risks associated with market fluctuations.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Real Estate
    10%
  • Consumer Discretionary
    8%
  • Industrials
    7%
  • Health Care
    7%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Utilities
    4%
  • Basic Materials
    3%
  • Energy
    3%

Sector-wise, the portfolio is diverse, with technology leading at 30.58%, followed by financial services and real estate. This indicates a tilt towards sectors with strong growth potential and income generation. The presence of consumer cyclicals, industrials, and healthcare further enhances diversification. Such a sector allocation can capture different economic cycles, but it also means that the portfolio might be more sensitive to sector-specific risks. A well-diversified sector allocation helps in spreading risk, but regular reviews are necessary to adjust for changing market conditions and sector performances.

Regions Info

  • North America
    75%
  • Asia Emerging
    8%
  • Europe Developed
    4%
  • Asia Developed
    3%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, with a 75.15% allocation. This is supplemented by emerging markets and developed regions in Asia and Europe. This geographic spread offers exposure to both stable, developed markets and high-growth potential in emerging regions. However, the heavy North American focus could mean vulnerability to regional economic downturns or policy changes. A geographically diversified portfolio can benefit from global growth trends, but it's important to monitor regional exposures to ensure they align with the investor's risk tolerance and investment goals.

Redundant positions Info

  • SPDR® Portfolio S&P 500 High Dividend ETF
    Vanguard Small-Cap Value Index Fund ETF Shares
    High correlation
  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares
    Vanguard Total International Stock Index Fund ETF Shares
    High correlation

Within this portfolio, certain assets exhibit high correlation, such as the SPDR® Portfolio S&P 500 High Dividend ETF with the Vanguard Small-Cap Value Index Fund, and the Vanguard Information Technology ETF with the Vanguard S&P 500 ETF. This suggests that these assets tend to move in similar directions, potentially reducing the diversification benefits. While correlation isn't inherently negative, it's important to ensure that the portfolio is not overly exposed to similar market movements. Diversifying with assets that have low correlation can help in achieving a more balanced 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.

Portfolio optimization involves aligning the asset allocation with the efficient frontier, where the highest expected return is achieved for a given risk level. Currently, the portfolio is broadly diversified but could benefit from reducing correlated assets that do not add diversification value. By reviewing and potentially adjusting the asset mix, the portfolio can move closer to the efficient frontier, optimizing the risk-return balance. This process involves analyzing the portfolio's performance metrics and correlations to ensure that each asset contributes to the overall investment strategy effectively.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • SPDR® Portfolio S&P 500 High Dividend ETF 4.00%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.90%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Real Estate Index Fund ETF Shares 3.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.04%

The portfolio offers a modest dividend yield of 2.04%, with contributions from various ETFs. The SPDR® Portfolio S&P 500 High Dividend ETF provides the highest yield at 4.0%, followed by the Vanguard Real Estate Index Fund at 3.8%. These dividends can provide a steady income stream, which is particularly beneficial during periods of market volatility. While the focus is on growth, the dividend component adds a layer of income, enhancing total returns. For income-focused investors, maintaining or increasing exposure to high-yielding assets can be a strategic move.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • SPDR® Portfolio S&P 500 High Dividend ETF 0.07%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

With a total expense ratio (TER) of 0.06%, the portfolio is cost-efficient, which is crucial for long-term investment success. Low costs mean more of the investment returns stay in the portfolio, compounding over time. The individual ETF expense ratios range from 0.03% to 0.12%, reflecting a focus on cost-effective investment solutions. Keeping investment costs low is a key factor in optimizing portfolio performance, as high fees can erode returns significantly over time. This portfolio's low-cost structure aligns well with the principle of maximizing net returns.

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