A balanced portfolio with strong diversification and low-cost efficient asset allocation

Report created on Jan 13, 2025

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 primarily composed of equities, with a significant allocation to the Vanguard S&P 500 ETF at 60%. It also includes international stocks and bonds. This allocation aligns with a balanced investment strategy, offering growth potential from equities while mitigating risk with bonds. The balance between domestic and international equities provides a broad market exposure. Consider reviewing the allocation periodically to ensure it remains aligned with your financial goals, especially if market conditions change or personal circumstances evolve.

Growth Info

The historical performance of the portfolio shows a Compound Annual Growth Rate (CAGR) of 10.32%, indicating robust growth over time. However, it has experienced a maximum drawdown of -30.93%, reflecting potential volatility. This performance is comparable to typical balanced portfolios, which aim for steady growth with moderate risk. While past performance is a useful indicator, it does not guarantee future results. Maintaining awareness of market trends and adjusting your strategy as needed can help manage risk and optimize returns.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, project an annualized return of 7.36% for this portfolio. The simulations suggest a 67th percentile growth of 212.29% over the investment horizon, indicating potential for substantial returns. However, the 5th percentile shows a possible loss of -2.18%, highlighting inherent risks. While these projections provide insight, they are not foolproof and should be used alongside other planning tools. Regularly reviewing and adjusting the portfolio can help manage expectations and align with your financial objectives.

Asset classes Info

  • Stocks
    87%
  • Bonds
    12%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 87% allocated to equities and 12% to bonds. This mix is typical of a balanced portfolio, offering growth potential from equities while bonds provide stability. The allocation aligns closely with benchmark norms for balanced portfolios, which commonly feature a similar stock-to-bond ratio. It's important to periodically reassess this balance to ensure it continues to meet your risk tolerance and investment goals, especially in response to changing market conditions.

Sectors Info

  • Technology
    23%
  • Financials
    14%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio's sector allocation is diverse, with a notable 23% in technology, followed by financial services and healthcare. This sectoral composition is well-aligned with benchmark data, indicating a diversified approach. However, the technology sector's high concentration may lead to increased volatility, particularly during interest rate fluctuations. Regularly reviewing sector allocations can help maintain a balanced risk profile and capitalize on emerging opportunities across different industries.

Regions Info

  • North America
    62%
  • Europe Developed
    11%
  • Asia Emerging
    5%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with over 61% exposure, complemented by allocations in Europe, Asia, and other regions. This distribution provides a good level of diversification, although it is slightly more concentrated in North America compared to global benchmarks. Consider monitoring geographic exposures to ensure they align with your long-term objectives and risk tolerance, especially in light of potential economic or political changes in these regions.

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 identifies the best possible risk-return ratio. This concept involves adjusting the asset allocation to achieve the highest expected return for a given level of risk. While the current allocation is well-balanced, periodic reviews may uncover opportunities for further optimization. Consider consulting with a financial advisor to explore potential adjustments that align with your risk tolerance and investment goals.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 2.18%

The portfolio's dividend yield stands at 2.18%, with contributions from both equity and bond ETFs. Dividends offer a steady income stream, which can be particularly appealing for investors seeking regular cash flow. This yield is in line with balanced portfolio expectations, providing a mix of growth and income. Regularly reviewing dividend yields and reinvesting them can enhance long-term portfolio performance, especially in a low-interest-rate environment.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio boasts impressively low costs, with an average Total Expense Ratio (TER) of 0.04%. This efficiency supports better long-term performance by minimizing the impact of fees on returns. Low costs are a significant advantage, allowing more of your investment to compound over time. Continue to monitor these costs and consider exploring other low-fee options if they align with your investment strategy, to maintain cost efficiency.

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