A balanced and highly diversified portfolio with a strong focus on US equities and low costs

Report created on Jan 4, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio consists primarily of ETFs, with the largest allocations in US and international stocks, followed by bonds and real estate. The inclusion of a small percentage in the S&P 500 ETF suggests a slight overlap with the broader US stock market fund. The composition aligns closely with a balanced investment strategy, providing exposure to both growth and income assets. To enhance diversification, consider reducing overlaps and adding unique asset types. This could provide a more efficient allocation of resources, potentially improving risk-adjusted returns over time.

Growth Info

Historically, this portfolio has delivered a Compound Annual Growth Rate (CAGR) of 8.3%, which is competitive compared to typical balanced portfolios. The maximum drawdown of -29.09% reflects the inherent market risks, particularly during downturns. While past performance is not indicative of future results, these metrics provide a reasonable baseline for expectations. To better withstand future market volatility, consider strategies such as increasing bond allocations or exploring alternative assets that may offer downside protection.

Projection Info

Forward projections using Monte Carlo simulations show a median expected return of 173.38% over the investment horizon, with a 67th percentile projection reaching 273.51%. These simulations use historical data to model potential outcomes, but it's crucial to remember that they can't predict future market conditions. To align with these projections, consider maintaining a diversified asset mix and regularly reviewing portfolio allocations to adapt to changing market dynamics.

Asset classes Info

  • Stocks
    71%
  • Bonds
    22%
  • Real Estate
    6%
  • Cash
    1%

The portfolio is diversified across stocks (71.26%), bonds (21.86%), and real estate (5.8%). This allocation is typical for balanced portfolios, providing a mix of growth and stability. Compared to benchmark norms, this allocation is well-balanced, offering a good distribution across asset classes. To further enhance diversification, consider exploring alternative asset classes such as commodities or infrastructure, which may provide additional protection against market volatility.

Sectors Info

  • Technology
    16%
  • Financials
    12%
  • Industrials
    8%
  • Real Estate
    8%
  • Consumer Discretionary
    8%
  • Health Care
    8%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%

Sector allocation is well-distributed, with technology, financial services, and industrials being the top sectors. This distribution mirrors common benchmarks and supports diversification. However, the tech-heavy allocation could lead to higher volatility, especially during periods of interest rate hikes. To mitigate this risk, consider adjusting sector weights to include more defensive sectors like utilities or consumer staples, which might offer more stability in uncertain market conditions.

Regions Info

  • North America
    48%
  • Europe Developed
    13%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographic exposure is mainly concentrated in North America (47.85%), with significant allocations in developed Europe and Asia. This aligns with global benchmarks, providing a diversified international presence. However, emerging markets are underrepresented, which could limit growth potential. To enhance geographic diversification, consider increasing exposure to emerging markets, which may offer higher growth prospects due to their developing economies and expanding consumer bases.

Redundant positions Info

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

The portfolio includes highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund and the S&P 500 ETF. High correlation can limit diversification benefits, especially during market downturns when correlated assets tend to move together. To improve diversification, consider removing one of these overlapping assets or replacing it with an asset that has a lower correlation to the rest of the portfolio, thereby enhancing risk management.

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 could benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting current asset allocations to maximize returns for a given level of risk. However, efficiency does not equate to diversification, so ensure that any changes align with your overall investment goals and risk tolerance. Regularly reassess your portfolio to maintain optimal performance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Real Estate Index Fund ETF Shares 3.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 2.66%

The portfolio's dividend yield stands at 2.66%, with real estate and bond ETFs contributing the most. Dividends provide a steady income stream, beneficial for investors seeking regular cash flow. This yield is competitive for a balanced portfolio, offering both income and growth potential. To optimize dividend income, consider reinvesting dividends or exploring higher-yielding assets, while balancing the need for growth and income.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • 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's total expense ratio (TER) is impressively low at 0.05%, thanks to the inclusion of cost-effective Vanguard ETFs. Low costs are crucial for long-term performance, as they allow more of your investment returns to compound over time. To maintain this advantage, regularly review the cost structure and consider replacing any higher-cost assets with similar, lower-cost alternatives to maximize net returns.

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