A balanced portfolio with strong US equity focus and moderate international diversification

Report created on Dec 30, 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 heavily weighted towards equities, with 60% in the Vanguard S&P 500 ETF. This allocation reflects a strong focus on large-cap US stocks. The inclusion of the Vanguard Total Bond Market Index Fund ETF at 20% provides some stability through fixed income. International exposure is present but limited, with 10% in the Vanguard Total International Stock Index Fund ETF. The small allocations to Avantis International and US Small Cap Value ETFs add a touch of diversification. Compared to a typical balanced portfolio, this one leans more heavily on US equities, which may increase volatility but also potential returns.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 12.22%. This suggests strong past performance, particularly given the S&P 500's significant contribution. However, the maximum drawdown of -28.78% indicates vulnerability during market downturns. The days that make up 90% of returns being only 16 highlights the importance of timing in equity-heavy portfolios. While past performance can offer insights, it's crucial to remember that it does not guarantee future results, and market conditions can change.

Projection Info

Using a Monte Carlo simulation, the portfolio's potential future outcomes were projected. This method uses historical data to estimate possible returns. The analysis shows a 50th percentile return of 233.93% and a 67th percentile of 364.67%, with 937 out of 1,000 simulations yielding positive returns. The annualized return across simulations is 11.17%. While these projections are encouraging, they rely on historical data and assumptions, which may not capture future market conditions or unexpected events.

Asset classes Info

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

The portfolio is predominantly composed of stocks, accounting for approximately 79.72% of the allocation. Bonds make up 19.70%, offering some balance and risk mitigation. This composition aligns with a moderately aggressive investment strategy, focusing on growth while maintaining some stability through fixed income. Compared to typical balanced portfolios, this one is more equity-heavy, which can lead to higher returns but also increased volatility. It's important to consider whether this risk level aligns with your investment goals and risk tolerance.

Sectors Info

  • Technology
    22%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Health Care
    8%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation reveals a significant concentration in technology at 21.64%, followed by financial services at 12.15%. This mirrors common benchmarks, which often emphasize these sectors. The portfolio's exposure to diverse sectors like consumer cyclicals and industrials helps balance potential sector-specific risks. However, the tech concentration might lead to higher volatility, especially during economic shifts or interest rate changes. It's advisable to monitor sector trends and consider rebalancing if a particular sector becomes too dominant.

Regions Info

  • North America
    66%
  • Europe Developed
    6%
  • Japan
    3%
  • Asia Emerging
    2%
  • Asia Developed
    1%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is heavily skewed towards North America, with 65.91% exposure. This aligns with the significant weighting in US equities. Europe and Japan are the next largest regions, though their exposures are relatively minor. While this focus on North America can capitalize on US market strength, it may limit diversification benefits. Consider increasing exposure to other global regions to enhance geographic diversification and mitigate potential risks associated with regional economic downturns.

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, which identifies the best possible risk-return ratio based on current assets. This approach focuses on maximizing returns for a given level of risk by adjusting the asset allocation. While the portfolio is already well-structured, exploring optimization can fine-tune the balance between risk and return. Remember that efficiency doesn't necessarily mean diversification, so ensure alignment with broader investment goals and risk tolerance.

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 3.30%
  • Weighted yield (per year) 2.08%

The portfolio's overall dividend yield stands at 2.08%, with contributions from various ETFs. Notably, the Avantis International Small Cap Value ETF offers a high yield of 4.3%, while the Vanguard S&P 500 ETF provides a lower yield of 1.2%. Dividends can contribute to overall returns and provide a steady income stream, particularly appealing for income-focused investors. While the yield is moderate, it's essential to balance the pursuit of dividends with the potential for capital appreciation.

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) 0.06%

The portfolio boasts impressively low costs, with a total expense ratio (TER) of 0.06%. This is primarily due to the low fees of the Vanguard ETFs, such as the Vanguard S&P 500 ETF at 0.03%. Keeping costs low is crucial for improving long-term returns, as high fees can erode gains over time. The efficient cost structure aligns with best practices and supports better performance. Regularly review fees to ensure they remain competitive and consider lower-cost alternatives if necessary.

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