A cautious portfolio with strong North American focus and moderate dividend yield

Report created on Jan 12, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

This portfolio is heavily weighted towards a single fund, the Vanguard Balanced Index Fund Institutional Shares, which accounts for over 89% of the total allocation. The remaining assets are spread across various funds and ETFs, with the Vanguard Total Stock Market Index Fund ETF Shares and Vanguard Total World Stock Index Fund ETF Shares being the next largest holdings. Such a concentrated allocation may limit diversification benefits. A more balanced distribution could enhance risk management and potentially improve returns.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 8.03%, which is a respectable return for a cautious profile. The max drawdown of -24.04% indicates the level of risk experienced during downturns. While past performance can provide insights, it doesn't guarantee future results. Aligning with a benchmark could offer a clearer picture of relative performance. Reviewing performance against similar risk profiles might identify areas for adjustment.

Projection Info

A Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a median annualized return of 8.38% for this portfolio. With 963 out of 1,000 simulations showing positive returns, the outlook is optimistic. However, simulations are only as good as the data they use, and they can't predict unforeseen market events. Regularly updating projections with the latest data can help maintain realistic expectations and guide adjustments.

Asset classes Info

  • Stocks
    65%
  • Bonds
    34%
  • Cash
    1%

The asset allocation is predominantly in stocks (approximately 65%) and bonds (about 34%), with negligible amounts in cash and other categories. This blend aligns with a cautious risk profile, providing a balance between growth potential and income generation. However, the portfolio's single-focused nature suggests limited diversification across asset classes. Introducing more varied asset classes could enhance stability and reduce volatility.

Sectors Info

  • Technology
    30%
  • Financials
    14%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%
  • Basic Materials
    2%
  • Consumer Discretionary
    1%

The portfolio is heavily tilted towards the technology sector, which comprises over 30% of the holdings. Other notable sectors include financial services and healthcare. While this concentration can drive growth, it also increases vulnerability to sector-specific downturns. Balancing sector exposure can help mitigate risk and take advantage of different economic cycles. Consider diversifying into less represented sectors to achieve a more balanced portfolio.

Regions Info

  • North America
    98%
  • Europe Developed
    1%

With nearly 98% exposure to North America, the portfolio is highly concentrated geographically. This focus might limit benefits from global diversification, such as reducing region-specific risks and capturing growth in emerging markets. A more geographically diverse portfolio could enhance resilience against regional economic downturns. Exploring opportunities in underrepresented regions may provide additional growth potential and risk mitigation.

Redundant positions Info

  • Fidelity 500 Index Fund
    Vanguard Total Stock Market Index Fund ETF Shares
    VANGUARD BALANCED INDEX FUND INSTITUTIONAL SHARES
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly among U.S.-focused funds. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this can lead to amplified losses. To improve diversification, consider replacing some of these correlated assets with those that have a lower correlation, thereby spreading risk more effectively across different market conditions.

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 seeks the best possible risk-return ratio for a given set of assets. By adjusting the allocation among existing assets, the portfolio might achieve a more efficient balance. However, efficiency focuses on risk and return, not necessarily diversification. Ensuring that changes align with the overall investment strategy and risk tolerance is essential for effective optimization.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total International Bond Index Fund ETF Shares 4.20%
  • FIDELITY INTERNATIONAL INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.40%
  • Fidelity 500 Index Fund 1.30%
  • VANGUARD BALANCED INDEX FUND INSTITUTIONAL SHARES 1.60%
  • Vanguard Total World Stock Index Fund ETF Shares 2.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.59%

The portfolio's overall dividend yield is 1.59%, with the highest contribution from the bond-focused ETFs. Dividends provide a steady income stream, which is valuable for cautious investors seeking income alongside capital growth. While the yield is modest, it aligns with the portfolio's conservative risk profile. To enhance income, consider increasing exposure to reliable dividend-paying assets. However, ensure this does not compromise diversification or risk management.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Bond Index Fund ETF Shares 0.07%
  • FIDELITY EXTENDED MARKET INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.04%
  • FIDELITY INTERNATIONAL INDEX FUND INSTITUTIONAL PREMIUM CLASS 0.04%
  • Fidelity 500 Index Fund 0.02%
  • VANGUARD BALANCED INDEX FUND INSTITUTIONAL SHARES 0.06%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, indicating low costs that support long-term performance by preserving more of the returns. Low fees are beneficial as they compound over time, enhancing net gains. Maintaining a focus on cost efficiency while ensuring adequate diversification is crucial. Regularly reviewing and comparing costs across similar investment options can help identify opportunities for further cost savings.

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