Balanced portfolio with strong US focus and moderate international diversification

Report created on Dec 31, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of 50% Vanguard S&P 500 ETF, 20% Vanguard Total Bond Market ETF, 10% Avantis International Small Cap Value ETF, 10% Avantis U.S. Small Cap Value ETF, and 10% Vanguard Total International Stock Index Fund ETF. This composition leans heavily towards equities, with a significant allocation to U.S. large-cap stocks. Compared to a typical balanced portfolio, which might have a 60/40 stock-bond split, this portfolio is more equity-focused. Consider increasing bond exposure if seeking reduced volatility or explore alternative assets for further diversification.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 12.03%, which is impressive for a balanced portfolio. A hypothetical initial investment would have grown significantly over time. The portfolio's max drawdown of -29.65% indicates potential for substantial losses during market downturns. While past performance is not a guarantee of future results, it suggests the portfolio has historically provided strong returns relative to risk. To mitigate potential future drawdowns, consider incorporating more defensive assets or increasing bond allocation.

Projection Info

Monte Carlo simulations, which use historical data to estimate future outcomes, project an annualized return of 11.52% for this portfolio. With 933 out of 1,000 simulations resulting in positive returns, the portfolio appears to have a high likelihood of success. The 5th percentile projection indicates a potential loss, highlighting the uncertainty inherent in investing. Remember, simulations are based on historical data and cannot predict future market conditions. Regularly review and adjust the portfolio as needed to align with changing market dynamics and personal goals.

Asset classes Info

  • Stocks
    80%
  • Bonds
    20%
  • Cash
    1%

The portfolio is predominantly invested in stocks (79.7%), with bonds making up 19.7% and minimal allocations to cash and other assets. This allocation is typical for a balanced portfolio, though slightly more equity-heavy. Stocks provide growth potential, while bonds can offer stability and income. If you want to increase diversification, consider adding alternative asset classes like real estate or commodities. This could help reduce risk and enhance returns by providing different sources of income and growth.

Sectors Info

  • Technology
    19%
  • Financials
    13%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Health Care
    7%
  • Telecommunications
    5%
  • Energy
    5%
  • Consumer Staples
    4%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is led by technology (18.9%), financial services (13.2%), and consumer cyclicals (9.6%). This distribution is well-aligned with common benchmarks, providing a balanced exposure across multiple sectors. However, a high concentration in technology may lead to increased volatility, especially during periods of interest rate changes. Consider diversifying further into less-represented sectors like utilities or real estate to reduce sector-specific risks and enhance stability in various market conditions.

Regions Info

  • North America
    61%
  • Europe Developed
    8%
  • Japan
    5%
  • Asia Emerging
    2%
  • Australasia
    1%
  • Asia Developed
    1%
  • Africa/Middle East
    1%

The portfolio is heavily weighted towards North America (61.4%), with smaller allocations to Europe and Asia. This geographic distribution aligns with typical U.S.-centric investment strategies but may limit exposure to emerging markets. Geographic diversification can reduce risk by spreading investments across different economic environments. Consider increasing exposure to underrepresented regions like Latin America or Africa to capture growth potential in emerging markets and reduce reliance on U.S. market performance.

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 concept, which aims to achieve the best possible risk-return ratio based on current assets. This process involves adjusting allocations to maximize returns for a given level of risk or minimize risk for a given return. While the current allocation is strong, consider periodic reviews and rebalancing to ensure the portfolio remains on the Efficient Frontier. This approach can help maintain optimal performance and align with evolving investment goals.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 2.27%

With a dividend yield of 2.27%, the portfolio provides a moderate level of income. Dividends can be an important component of total returns, especially for investors seeking regular income. The yield is supported by contributions from the Avantis International Small Cap Value ETF and the Vanguard Total Bond Market ETF. If income generation is a priority, consider increasing allocations to higher-yielding assets or dividend-focused funds to enhance cash flow while maintaining growth potential.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • 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) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is impressively low and supports better long-term performance by minimizing costs. Low fees are crucial for maximizing returns, as they can significantly impact the compounding effect over time. This cost efficiency is a strength of the portfolio. Continue to monitor fees and explore opportunities to replace any higher-cost funds with lower-cost alternatives, such as index funds or ETFs, to maintain cost-effectiveness.

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