A balanced low cost portfolio with strong diversification and some overlap in broad stock exposure

Report created on Nov 12, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is built around five broad ETFs, with 80 percent in stocks and 20 percent in bonds and cash. The core is split between total US stocks, a large US index, and developed markets outside the US, plus high‑quality bonds across different maturities. Compared with a typical balanced benchmark, this leans slightly more toward stocks, which explains the risk score sitting in the middle of the range. Structurally this is clean and easy to manage, but the two broad US stock funds are doing very similar jobs. It could help to streamline those overlapping pieces while keeping the overall stock‑bond mix steady if the current risk level feels right.

Growth Info

Historically, this mix delivered an annual growth rate (CAGR) of about 11 percent, meaning 10,000 dollars would have grown to roughly 28,000 over ten years if returns were smooth. Of course, markets are bumpy: the max drawdown near minus 29 percent shows what a bad downturn has looked like. That’s in line with a growth‑tilted balanced approach and compares reasonably with broad stock benchmarks, which often fell more. This suggests the risk and return profile has been healthy. Still, past results are not a promise; it’s useful to mentally rehearse a 25–30 percent drop and decide if that feels tolerable.

Projection Info

The Monte Carlo analysis ran 1,000 simulations using historical patterns to estimate future ranges. In simple terms, it “shuffles” past returns many times to see what different paths might look like. The median outcome around 207 percent growth suggests that, in a typical scenario, 10,000 might grow to about 30,700 over the tested horizon, while the 5th percentile near 30 percent shows a much weaker but still positive case. An average simulated annual return of about 9.25 percent is encouraging. Still, these are models based on the past; sudden shifts in inflation, rates, or growth can push real‑world results outside these ranges.

Asset classes Info

  • Stocks
    79%
  • Bonds
    20%
  • Cash
    1%

The asset mix is roughly 79 percent stocks, 20 percent bonds, and a sliver of cash. That’s slightly more aggressive than a classic 60/40 balanced setup but still far from an all‑equity posture. This structure supports long‑term growth while using bonds to cushion some volatility and provide income. The bond sleeve is all high‑quality, which is great for stability but won’t behave like riskier credit in rallies. Overall, this allocation is well‑balanced and aligns closely with global standards for a growth‑oriented balanced profile. If shorter‑term stability is a priority, nudging bonds up a bit could smooth the ride without radically changing the overall design.

Sectors Info

  • Technology
    21%
  • Financials
    13%
  • Industrials
    10%
  • Consumer Discretionary
    8%
  • Health Care
    7%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector exposure is broad: technology leads at 21 percent, followed by financials, industrials, consumer areas, healthcare, and then smaller slices of materials, energy, utilities, and real estate. This distribution looks very similar to common broad market benchmarks, which is a good signal. Tech‑heavy tilts, like this modest one, can push returns higher in boom times but also make the portfolio more sensitive when interest rates rise or when growth stocks fall out of favor. The positive part is that no single sector overwhelms the mix. Staying close to broad market weights while avoiding big one‑sector bets keeps things resilient through different economic cycles.

Regions Info

  • North America
    53%
  • Europe Developed
    15%
  • Japan
    6%
  • Asia Developed
    3%
  • Australasia
    2%

Geographically, about 53 percent is in North America with the rest spread across developed Europe, Japan, and other developed Asia. That’s fairly close to global market norms and gives strong home‑country exposure without ignoring the rest of the developed world. There is minimal allocation to emerging markets, which reduces certain political and currency risks but also skips a potential long‑term growth engine. For many balanced investors, this developed‑world focus feels comfortable and familiar. Anyone wanting more global balance could consider adding a small slice of diversified emerging exposure, but there’s nothing problematic about keeping things tilted toward developed markets.

Market capitalization Info

  • Mega-cap
    35%
  • Large-cap
    25%
  • Mid-cap
    14%
  • Small-cap
    3%
  • Micro-cap
    1%

Most of the stock exposure sits in mega and large companies, with smaller portions in mid, small, and micro caps. That’s exactly what you’d expect when using broad market index funds, since global markets are naturally dominated by big firms. This tilt tends to lower volatility versus a heavy small‑cap approach and usually improves liquidity and trading ease. At the same time, having at least some small and mid‑cap exposure (which you do) helps capture more of the market’s full growth spectrum. This balance looks healthy; anyone craving extra growth could slightly raise smaller‑company exposure, but the current split is already sound.

Redundant positions Info

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

There is a clear high correlation between the S&P 500 ETF and the total US stock market ETF. Correlation just means how often two investments move in the same direction; when it’s very high, they behave almost like duplicates. Holding two nearly identical broad US stock funds doesn’t add much diversification, especially during market downturns when everything in that bucket tends to fall together. The rest of the portfolio—bonds and international stocks—does provide meaningful diversification. To simplify and reduce overlap, it could be useful to consolidate into one core US stock fund while keeping the rest of the structure intact for balance.

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.

From a risk‑return perspective, this portfolio sits in a solid spot but could be nudged closer to the Efficient Frontier. The Efficient Frontier is simply the line of portfolios that give the best expected return for each level of risk, using the same building blocks. Here, the main drag on efficiency is overlapping US stock funds that don’t add new behavior. Streamlining to one core US holding and adjusting the split between stocks and bonds could move you closer to that “best possible” trade‑off. Note that efficiency here is purely about risk versus return, not personal goals or preferences.

Dividends Info

  • iShares Core U.S. Aggregate Bond ETF 3.90%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 2.70%
  • Vanguard Short-Term Treasury Index Fund ETF Shares 4.00%
  • Vanguard S&P 500 ETF 1.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.10%
  • Weighted yield (per year) 2.15%

The overall yield of about 2.15 percent comes from a mix of bond interest and stock dividends. Bonds are doing the heavy lifting here, with yields around 3.9–4 percent, while the equity funds sit closer to 1–2.7 percent. For someone focusing on total return (growth plus income), this is a reasonable income profile that doesn’t stretch into riskier high‑yield territory. It’s also consistent with broad index investing. Dividend and interest income can help soften the emotional impact of market swings, but it will fluctuate as rates and corporate payout policies change, so it’s better viewed as a bonus rather than a guarantee.

Ongoing product costs Info

  • iShares Core U.S. Aggregate Bond ETF 0.03%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Short-Term Treasury Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The total expense ratio (TER) of roughly 0.04 percent is impressively low. TER is the annual fee charged by funds, and keeping it tiny means more of the portfolio’s return stays in your pocket. Over decades, even a difference of 0.3–0.5 percentage points per year can compound into a big dollar gap. This cost structure is better than most managed portfolios and nicely supports long‑term performance. Since costs are already optimized, there’s no pressing need to chase further fee cuts; the bigger levers now are asset mix, time in the market, and staying disciplined through ups and downs.

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