Balanced Portfolio with Broad Diversification and Strong Historical Performance but Potential for Optimization

Report created on Nov 18, 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 consists of two main ETFs: Vanguard Total Stock Market Index Fund ETF Shares at 65% and Vanguard Total International Stock Index Fund ETF Shares at 35%. This indicates a balanced approach with a strong tilt towards U.S. equities, reflecting a preference for broad market exposure. The allocation provides diversification across various sectors and geographic regions, making it a robust choice for investors seeking a comprehensive market representation. It's well-suited for those who want to participate in both domestic and international markets without overly concentrating on specific sectors or regions.

Growth Info

Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 10.98%. This impressive return is indicative of the strong performance of both U.S. and international equities over time. However, the portfolio has also experienced a significant maximum drawdown of -34.54%, highlighting the inherent risks associated with equity investments. It's crucial for investors to weigh these historical returns against their risk tolerance and long-term investment goals. The portfolio's ability to recover from downturns is a positive sign for long-term investors looking for growth.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method helps assess potential outcomes by simulating a range of possible scenarios. The median projection shows a potential increase of 222.35%, with a 5th percentile outcome of 18.19% and a 67th percentile of 335.74%. The simulation indicates a high likelihood of positive returns, with 972 simulations showing gains. The annualized return across all simulations is 10.31%, suggesting continued strong performance. Investors should consider these projections when evaluating the portfolio's alignment with their financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 99.33% of the total allocation. This high equity exposure offers substantial growth potential but also introduces increased volatility. The minimal cash and other asset allocations suggest a focus on maximizing returns through equity investments. Investors should ensure this aligns with their risk appetite, as a predominantly stock-based portfolio may experience significant fluctuations. For those seeking to reduce risk, incorporating more fixed-income assets could provide stability and diversification benefits, potentially smoothing out returns over time.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Industrials
    11%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio is diversified across 11 sectors, with technology leading at 24.55%, followed by financial services and industrials. This sector allocation reflects a balanced approach, capturing growth opportunities in tech while maintaining exposure to more stable sectors like healthcare and consumer cyclicals. Such diversification helps mitigate sector-specific risks, providing a buffer against downturns in any single industry. Investors should regularly review sector allocations to ensure they remain aligned with market trends and personal investment objectives, potentially rebalancing to maintain desired exposure levels.

Regions Info

  • North America
    67%
  • Europe Developed
    14%
  • Asia Emerging
    6%
  • Japan
    5%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is primarily focused on North America, accounting for 67.42% of the allocation. This strong emphasis on the U.S. market is complemented by exposure to developed regions like Europe and Japan, as well as emerging markets in Asia. Such geographic diversification reduces reliance on any single economy, offering opportunities for growth across different regions. Investors should consider their comfort with this geographic mix, as it influences the portfolio's sensitivity to global economic developments. Adjusting allocations can help manage risks associated with regional market fluctuations.

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 current portfolio is efficient, lying close to the efficient frontier, which represents the optimal risk-return trade-off. However, it's not the absolute optimal portfolio, as the optimal one has a higher expected return of 13.59% with a risk level of 18.00%. Investors should consider whether their current risk level aligns with their financial goals. Adjusting the risk level could potentially enhance returns, but it's essential to balance this with personal risk tolerance. Exploring different risk levels may offer opportunities for optimization, ensuring the portfolio remains aligned with evolving investment objectives.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.90%

The portfolio's dividend yield stands at 1.9%, with the Vanguard Total Stock Market Index Fund ETF Shares yielding 1.3% and the Vanguard Total International Stock Index Fund ETF Shares at 3.0%. This provides a modest income stream, appealing to investors seeking a balance between growth and income. Dividends can cushion against market volatility, offering a steady return component. Investors should consider their income needs and evaluate whether this yield aligns with their financial goals. Reinvesting dividends can enhance compounding, boosting long-term portfolio growth.

Ongoing product costs Info

  • 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) 0.05%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.05%. This is a significant advantage, as minimizing fees enhances overall returns. The Vanguard Total Stock Market Index Fund ETF Shares has an expense ratio of 0.03%, while the Vanguard Total International Stock Index Fund ETF Shares is slightly higher at 0.08%. Keeping costs low is crucial for long-term investors, as high fees can erode gains over time. Investors should periodically review expense ratios to ensure they remain competitive and aligned with the portfolio's investment strategy.

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