A balanced portfolio with strong US focus and high correlation among core assets

Report created on Jan 3, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio comprises three ETFs with significant weightings: the Vanguard S&P 500 ETF (41.68%), Vanguard Value Index Fund ETF Shares (32.14%), and Vanguard Total Stock Market Index Fund ETF Shares (26.18%). The composition heavily leans towards equities, with a minor cash position. Compared to typical balanced portfolios, this one is less diversified, focusing mainly on US equities. A more diversified portfolio might include a mix of bonds, international stocks, or alternative investments. Consider broadening asset types for better risk distribution.

Growth Info

Historically, this portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 13.17%. However, it experienced a significant max drawdown of 35%, indicating vulnerability during market downturns. For context, balanced portfolios often aim for lower drawdowns. While past performance is encouraging, remember that it doesn't guarantee future results. To mitigate potential drawdowns, consider incorporating assets with lower volatility, such as bonds or defensive stocks.

Projection Info

Monte Carlo simulations, using historical data, predict a range of future outcomes for this portfolio. With 1,000 simulations, the median result suggests a potential growth of 402.05%, while the 5th percentile indicates a worst-case growth of 75.47%. Although 996 simulations showed positive returns, remember that simulations rely on past data and can't predict future market changes. To enhance projections, consider adjusting asset allocations to include less correlated assets, potentially improving risk-adjusted returns.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in stocks (99.86%), with minimal cash holdings. This lack of asset class diversification can heighten risk exposure during equity market downturns. A typical balanced portfolio might include bonds, real estate, or commodities to provide stability and income. To achieve a more balanced risk profile, consider diversifying into non-equity asset classes, which can help cushion the portfolio against stock market volatility.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Health Care
    13%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Consumer Staples
    7%
  • Telecommunications
    7%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    3%
  • Basic Materials
    2%

Sector allocation shows a strong emphasis on technology (25.43%), followed by financial services (16.10%) and healthcare (13.27%). This concentration can lead to increased volatility, particularly if these sectors face downturns. Balanced portfolios often aim for more even sector distribution to reduce sector-specific risks. To mitigate volatility, consider rebalancing to achieve more equal exposure across sectors, possibly incorporating sectors like utilities or consumer staples, which can offer stability.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

The portfolio's geographic allocation is heavily skewed towards North America (99.36%), with minimal exposure to other regions. This concentration limits global diversification and exposes the portfolio to regional economic risks. A more balanced geographic allocation would include a mix of developed and emerging markets. Consider increasing exposure to international markets, which can enhance diversification and potentially capture growth opportunities outside the US.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets are highly correlated, especially between the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can amplify losses. To improve diversification, consider adding assets with lower correlation, such as bonds or international equities, which can provide a buffer against synchronized market movements.

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 seeks the best possible risk-return ratio based on current assets. However, optimization is limited by the high correlation between existing assets, which restricts diversification benefits. Before optimizing, consider reducing overlap by replacing highly correlated assets with others that offer unique risk-return characteristics. This approach can enhance efficiency and potentially improve long-term outcomes.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Value Index Fund ETF Shares 1.70%
  • Weighted yield (per year) 1.39%

This portfolio offers a moderate dividend yield of 1.39%, contributing to total returns. Dividend income can provide stability, especially during volatile markets. However, the yield is relatively low compared to income-focused portfolios. If income generation is a goal, consider incorporating higher-yielding assets, such as dividend-focused ETFs or bonds, which can enhance cash flow and provide a cushion during market downturns.

Ongoing product costs Info

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

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.03%. Low costs are crucial for long-term performance, as they prevent fees from eroding returns. Compared to industry averages, these costs are impressively low, supporting better net returns over time. Maintaining this cost efficiency is beneficial, but always review costs periodically to ensure they remain competitive as investment options evolve.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey