A balanced ESG-focused portfolio with strong diversification and moderate risk exposure

Report created on Dec 7, 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 primarily of equity ETFs, with a 50% allocation to Vanguard ESG US Stock and a 30% allocation to Vanguard ESG International Stock. Bonds and real estate make up the remainder, with 10% in Vanguard ESG U.S. Corporate Bond ETF, 5% in Vanguard Total Bond Market Index Fund ETF Shares, and 5% in Vanguard Real Estate Index Fund ETF Shares. This composition indicates a focus on ESG principles, with equities being the dominant asset class. This balance between stocks and bonds suggests a moderate risk approach, suitable for an investor seeking growth with some income stability. Consider reviewing the equity-bond balance periodically to ensure alignment with changing market conditions and personal risk tolerance.

Growth Info

Historically, the portfolio has performed well with a compound annual growth rate (CAGR) of 11.32%. However, it has also experienced significant volatility, with a maximum drawdown of -27.97%. This means that while the portfolio has delivered strong returns, it has also faced periods of substantial decline. Understanding past performance helps set realistic expectations, but it's important to remember that past success does not guarantee future results. To mitigate potential downturns, consider diversifying further or incorporating more defensive assets if market conditions suggest increased volatility.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes for the portfolio, using historical data to forecast future performance. With 1,000 simulations, the portfolio shows a 6.88% annualized return across all simulations, with 943 simulations resulting in positive returns. The 5th percentile projects a -4.23% return, while the 50th and 67th percentiles project 128.04% and 193.54% returns, respectively. Although these projections provide a useful framework for understanding potential future performance, they are based on historical data and assumptions that may not hold true. Regularly reviewing and adjusting the portfolio can help address unexpected market changes.

Asset classes Info

  • Stocks
    79%
  • Bonds
    15%
  • Real Estate
    5%
  • Cash
    1%

The portfolio is diversified across three main asset classes: stocks (79.06%), bonds (14.88%), and real estate (5%). This allocation suggests a strong emphasis on growth through equities, complemented by income and stability from bonds and real estate. A well-diversified asset allocation can help mitigate risk by spreading investments across different asset classes. However, it’s important to periodically reassess the allocation to ensure it aligns with investment goals and risk tolerance. Consider exploring alternative asset classes or increasing exposure to underrepresented areas to further enhance diversification.

Sectors Info

  • Technology
    23%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Real Estate
    8%
  • Telecommunications
    7%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Basic Materials
    3%

The portfolio is diversified across several sectors, with notable allocations in technology (22.86%), financial services (14.49%), and healthcare (9.92%). These sectors are known for their potential growth and stability, respectively. Sector diversification is crucial as it helps reduce the risk associated with any single industry. However, the high concentration in technology could expose the portfolio to sector-specific risks. To manage this, consider balancing technology exposure with other sectors that may offer defensive characteristics, such as consumer defensives or utilities, depending on market outlook and personal preferences.

Regions Info

  • North America
    57%
  • Europe Developed
    11%
  • Japan
    5%
  • Asia Emerging
    5%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio has a strong focus on North America, with 56.51% of assets allocated to this region. The remaining exposure is spread across Europe, Japan, and emerging markets in Asia, among others. Geographic diversification can help reduce the impact of regional economic downturns on the portfolio. However, the heavy reliance on North American markets could introduce regional risk. To enhance geographic diversification, consider increasing allocations to underrepresented regions, such as emerging markets or Europe, to capitalize on growth opportunities and mitigate potential regional risks.

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 potentially be optimized using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio by adjusting allocations among current assets. This approach focuses on maximizing returns for a given level of risk or minimizing risk for a desired return. However, optimization is based on historical data and assumptions that may not reflect future conditions. Regularly revisit the portfolio's asset allocation to ensure it remains on the Efficient Frontier and aligns with personal investment goals and risk tolerance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard ESG US Stock 1.00%
  • Vanguard ESG U.S. Corporate Bond ETF 4.00%
  • Vanguard Real Estate Index Fund ETF Shares 3.80%
  • Vanguard ESG International Stock 3.00%
  • Weighted yield (per year) 2.17%

With a total dividend yield of 2.17%, the portfolio offers a modest income stream. The Vanguard ESG U.S. Corporate Bond ETF and Vanguard Real Estate Index Fund ETF Shares provide higher yields at 4.0% and 3.8%, respectively. Dividends can be an important source of income, particularly during periods of market volatility. Reinvesting dividends can also enhance long-term growth through compounding. Consider whether the current yield aligns with income needs and explore opportunities to increase dividend exposure if desired. Balancing growth and income is key to achieving financial goals.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard ESG US Stock 0.09%
  • Vanguard ESG U.S. Corporate Bond ETF 0.12%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard ESG International Stock 0.12%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, which is relatively low. Low costs are advantageous as they help maximize net returns over time. Each ETF has its own expense ratio, with the Vanguard Total Bond Market Index Fund ETF Shares being the lowest at 0.03%. Keeping costs in check is crucial for long-term investment success, as high fees can erode returns. Regularly review the cost structure and explore lower-cost alternatives if available. Additionally, consider the trade-off between cost and potential returns when evaluating investment options.

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