A balanced portfolio with strong U.S. focus and moderate growth potential
Report created on Apr 7, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VT VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES
VTSAX - US9229087286 70.00% -
VT VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES
VTIAX - US9219098186 15.00% -
VU Vanguard Growth Index Fund ETF Shares
VUG - US9229087369 15.00%
The portfolio is primarily composed of U.S. equities, with 70% allocated to the Vanguard Total Stock Market Index Fund, 15% to the Vanguard Total International Stock Index Fund, and 15% to the Vanguard Growth Index Fund ETF. This composition leans heavily towards stocks, with a minimal cash allocation of 1%. Compared to a typical balanced benchmark, this portfolio is more equity-focused, potentially increasing volatility. While the broad diversification across sectors and geographies is positive, the heavy U.S. weighting may limit international growth opportunities. Consider gradually increasing international exposure to enhance global diversification and reduce potential U.S. market-specific risks.
Growth
Historically, the portfolio has demonstrated a strong Compound Annual Growth Rate (CAGR) of 11.10%, indicating robust performance over time. However, it also experienced a maximum drawdown of -34.22%, highlighting potential volatility during market downturns. Compared to a balanced benchmark, this performance suggests a higher risk-return profile. The concentration of returns in just 24 days underscores the importance of staying invested to capture gains. While past performance is promising, it should not be the sole basis for future expectations. Regularly reviewing performance against personal goals can help in making informed adjustments.
Projection
The Monte Carlo simulation, which uses historical data to model potential future outcomes, suggests an annualized return of 11.31% across 1,000 simulations. With 970 simulations showing positive returns, the outlook is generally favorable. However, the 5th percentile projection indicates a potential downside of 19.4%, emphasizing the inherent uncertainty in projections. While these simulations provide a range of possible outcomes, they rely on historical data, which may not account for future market shifts. It's crucial to remain adaptable and consider various scenarios when planning for the future, ensuring alignment with personal risk tolerance and goals.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio's allocation is heavily skewed towards equities, with 99% in stocks and just 1% in cash. This concentration in a single asset class limits diversification benefits and exposes the portfolio to equity market volatility. Compared to a balanced benchmark, which typically includes bonds and other asset classes, this portfolio may experience higher fluctuations. While equities offer growth potential, incorporating fixed-income assets could help mitigate risk and provide stability. Regularly reassessing the asset mix to ensure alignment with risk tolerance and investment objectives is advisable, especially during different market cycles.
Sectors
- Technology 31%
- Financials 14%
- Health Care 10%
- Consumer Discretionary 9%
- Telecommunications 9%
- Industrials 9%
- Consumer Staples 5%
- Energy 3%
- Real Estate 3%
- Basic Materials 3%
- Consumer Discretionary 2%
- Utilities 2%
The portfolio's sector allocation reveals a significant tilt towards technology, comprising 31% of the total. This is followed by financial services at 14% and healthcare at 10%. While the tech sector has driven recent market gains, it may also introduce higher volatility, especially during interest rate hikes. Compared to common benchmarks, the portfolio's sector composition is well-diversified, covering 12 sectors. However, the heavy tech weighting could lead to increased risk during sector downturns. Balancing sector exposure by gradually increasing allocations to underrepresented sectors can enhance stability and reduce potential sector-specific risks.
Regions
- North America 86%
- Europe Developed 6%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily weighted towards North America, comprising 86% of the allocation. This significant U.S. focus may limit exposure to international growth opportunities and diversification benefits. Compared to common benchmarks, there is an underweighting in emerging markets and developed regions outside North America. While U.S. equities have performed well historically, increasing international exposure, particularly in emerging markets, could enhance diversification and capture global growth trends. Regularly reviewing geographic allocations and considering shifts in global economic conditions can help optimize the portfolio's risk-return profile.
Market capitalization
- Mega-cap 45%
- Large-cap 29%
- Mid-cap 18%
- Small-cap 5%
- Micro-cap 2%
The portfolio's market capitalization distribution shows a strong preference for large-cap stocks, with 45% in mega-caps and 29% in big-caps. Medium-cap stocks account for 18%, while small and micro-caps make up 7%. This skew towards large-cap stocks generally provides stability and lower volatility compared to small-cap stocks. However, it may also limit potential growth opportunities associated with smaller companies. Balancing the market cap exposure by gradually increasing allocations to small and medium-cap stocks could enhance diversification and capture higher growth potential, aligning with long-term investment goals.
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 potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio for a given set of assets. Currently, the heavy equity weighting may not align with the optimal risk-return balance. By adjusting allocations among existing assets, the portfolio can achieve a more efficient risk-return profile. However, it's important to note that efficiency is based solely on current assets and does not guarantee diversification or other goals. Regularly reviewing the portfolio's risk-return dynamics and considering rebalancing can help maintain alignment with personal investment objectives and risk tolerance.
Dividends
- VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 3.00%
- VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.10%
- Vanguard Growth Index Fund ETF Shares 0.40%
- Weighted yield (per year) 1.28%
The portfolio's dividend yield stands at 1.28%, with the Vanguard Total International Stock Index Fund contributing a higher yield of 3.00%. Dividends provide a steady income stream and can enhance total returns, especially in low-growth environments. Compared to growth-focused portfolios, this yield is moderate, reflecting the portfolio's balanced nature. While dividends offer stability, they may not be the primary driver of returns for growth-oriented investors. Regularly reviewing dividend policies and considering reinvestment strategies can help optimize income generation and align with personal financial goals.
Ongoing product costs
- Vanguard Growth Index Fund ETF Shares 0.04%
- Weighted costs total (per year) 0.01%
The portfolio's costs are impressively low, with the Vanguard Growth Index Fund ETF having a Total Expense Ratio (TER) of 0.04% and an overall TER of 0.01%. Low costs are advantageous as they enhance net returns over the long term by minimizing expenses. Compared to industry averages, these costs are highly competitive, supporting better performance. While costs are already optimized, it's crucial to remain vigilant and periodically review fees to ensure they remain competitive. Maintaining low costs is a key factor in maximizing long-term portfolio growth and achieving financial objectives.
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