Balanced Risk Broadly Diversified Portfolio with Strong Global Exposure and Low Costs Suitable for Moderate Investors

Report created on Nov 28, 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 composed entirely of the Vanguard Total World Stock Index Fund ETF, indicating a single, diversified investment vehicle. This ETF offers exposure to a wide array of global stocks, making it a comprehensive choice for investors seeking broad market coverage. With a risk score of 4 out of 7, it strikes a balance between risk and return. The diversification score of 4 out of 5 highlights its effectiveness in spreading risk across different sectors and regions. This setup is ideal for those who prefer a hands-off approach, relying on the fund's inherent diversification.

Growth Info

Historically, the portfolio has delivered a solid compound annual growth rate (CAGR) of 10.51%, reflecting its potential for robust returns. However, it's important to note the maximum drawdown of -34.2%, which indicates significant volatility during downturns. This performance suggests that while the portfolio can yield substantial gains, it is also susceptible to market fluctuations. The days that make up 90% of returns being just 24 highlights the importance of staying invested to capture these key periods of growth. Overall, the historical performance underscores the need for a long-term investment horizon.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, we projected potential future outcomes for the portfolio. The simulation, which uses random sampling to model possible future returns, indicates a median (50th percentile) outcome of a 266.88% return on a hypothetical initial investment. The 5th percentile shows a conservative 26.19% return, while the 67th percentile offers a more optimistic 393.31% return. With 976 simulations showing positive returns, the annualized return across simulations is 11.13%. This suggests a favorable outlook, though variability in outcomes highlights inherent investment risks.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's asset class allocation is heavily skewed towards stocks, comprising 99.2% of the total, with minimal exposure to cash and other assets. This concentration in equities aligns with the portfolio's balanced risk profile, offering potential for higher returns but also increased volatility. The lack of significant diversification across asset classes suggests a focus on capital growth rather than income generation or capital preservation. Investors should consider whether this equity-heavy allocation aligns with their risk tolerance and financial goals, especially during market downturns.

Sectors Info

  • Technology
    24%
  • Financials
    16%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation within the portfolio is diverse, with technology leading at 24.29%, followed by financial services and industrials. This distribution reflects a broad exposure to different economic segments, reducing sector-specific risk. The prominence of technology indicates a potential for growth but also exposure to sector volatility. The inclusion of traditionally stable sectors like healthcare and utilities provides a buffer against market swings. Investors should be aware of the potential impact of sector-specific events on their portfolio and consider how this mix aligns with their investment strategy.

Regions Info

  • North America
    65%
  • Europe Developed
    15%
  • Asia Emerging
    6%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for 64.72% of its assets, followed by Europe Developed and Asia Emerging markets. This global spread provides exposure to diverse economic environments and growth opportunities. The significant North American focus suggests a reliance on the region's economic performance, which could impact returns if the region faces downturns. The inclusion of emerging markets offers growth potential but also introduces additional risk. Investors should evaluate whether this geographic allocation aligns with their risk tolerance and global market outlook.

Dividends Info

  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Weighted yield (per year) 1.80%

The portfolio has a dividend yield of 1.8%, which provides a modest income stream alongside potential capital appreciation. This yield is a result of the underlying stocks within the Vanguard Total World Stock Index Fund ETF, which distribute dividends. While not a primary income generator, the dividends can contribute to total returns, especially when reinvested. For investors seeking higher income, this yield may not suffice, but it is a positive addition for those focused on growth. Monitoring dividend trends can offer insights into the portfolio's income potential over time.

Ongoing product costs Info

  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio benefits from low costs, with a total expense ratio (TER) of just 0.07%, thanks to the Vanguard Total World Stock Index Fund ETF. This low-cost structure enhances net returns, as less of the portfolio's gains are eroded by fees. Keeping investment costs low is crucial for maximizing long-term growth, as high fees can significantly impact compounding returns. Investors should continue to prioritize cost-effective investment options to maintain this advantage. Regularly reviewing and comparing expense ratios can ensure the portfolio remains aligned with cost-efficiency goals.

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