Balanced Portfolio with Strong US Focus and Broad Diversification Across Sectors and Global Markets

Report created on Dec 2, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of two primary ETFs: the Vanguard S&P 500 ETF, making up 80%, and the Vanguard Total International Stock Index Fund ETF Shares, comprising 20%. This composition offers a balanced approach, heavily weighted towards US equities while maintaining some exposure to international markets. Such a setup provides a strong base for growth while benefiting from the stability and performance of the US market. To further enhance diversification, consider exploring additional asset classes or instruments that could complement the existing structure, potentially reducing volatility and increasing resilience against market fluctuations.

Growth Info

Historically, the portfolio has shown a robust performance with a compound annual growth rate (CAGR) of 12.55%. Despite experiencing a maximum drawdown of -33.9%, the portfolio has demonstrated resilience and the potential for recovery. This performance suggests a solid return on investment over the long term, though it also highlights the need for risk management strategies to mitigate potential losses during market downturns. To optimize performance, maintaining a balanced approach and regularly reviewing the portfolio's allocation can help sustain growth while managing risk effectively.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's potential future performance was projected. This method uses random sampling to model possible outcomes, providing a range of potential returns. The results indicate a 50th percentile end portfolio value of 269.65% and a 67th percentile of 389.86%, with 965 simulations showing positive returns. The annualized return across all simulations is 11.09%, suggesting a favorable outlook. To capitalize on these projections, maintaining the current diversification and periodically reassessing risk tolerance can help align the portfolio with long-term financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio's asset class allocation is heavily skewed towards stocks, constituting approximately 99.63% of the total. This concentration indicates a growth-oriented strategy, leveraging the potential for higher returns associated with equities. However, such an allocation may expose the portfolio to increased volatility. To mitigate this risk, consider incorporating a modest allocation to fixed income or alternative investments, which could provide stability and income during periods of market uncertainty, while still supporting the portfolio's overall growth objectives.

Sectors Info

  • Technology
    29%
  • Financials
    14%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation within the portfolio is diverse, with significant exposure to technology (29.02%), financial services (14.44%), and healthcare (10.79%). This broad sector distribution helps reduce the risk associated with individual sector downturns, offering a buffer against market volatility. The portfolio's sector composition aligns with a growth-oriented strategy, capitalizing on high-performing industries. To maintain a balanced approach, regularly reviewing sector allocations and making adjustments based on market trends and economic conditions can help ensure continued alignment with investment goals and risk tolerance.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, which accounts for 81.08% of the allocation. This heavy emphasis on the US market provides stability and growth potential, but it also limits exposure to other regions. To enhance geographic diversification, consider increasing allocations to emerging markets or other developed regions, which may offer additional growth opportunities and reduce reliance on the US economy. This strategy could help balance the portfolio's risk profile while potentially capturing returns from diverse global markets.

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's optimization chart suggests that while it's broadly diversified, there may be opportunities to optimize further along the efficient frontier. By adjusting allocations, investors can potentially achieve a more risk-efficient portfolio, either by reducing risk or enhancing returns. To move towards a riskier portfolio, consider increasing exposure to high-growth sectors or regions. Conversely, for a more conservative approach, allocate more to fixed income or defensive sectors. Regularly reviewing the portfolio's performance and alignment with risk tolerance and financial goals will help ensure it remains optimized for long-term success.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.56%

With a total dividend yield of 1.56%, the portfolio provides a modest income stream, primarily driven by the Vanguard S&P 500 ETF's yield of 1.2% and the Vanguard Total International Stock Index Fund ETF Shares' yield of 3.0%. This dividend income can offer some stability and cash flow, particularly during periods of market volatility. To potentially increase dividend income, consider exploring additional dividend-focused investments. However, it's important to balance the pursuit of higher yields with the overall growth and risk objectives of the portfolio.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.04%. This cost efficiency is primarily due to the Vanguard S&P 500 ETF's 0.03% expense ratio and the Vanguard Total International Stock Index Fund ETF Shares' 0.08% expense ratio. Keeping costs low is crucial for maximizing net returns over time. To maintain this advantage, continue prioritizing low-cost investment options and regularly reviewing the portfolio's expense ratios. This focus on cost management will help ensure that more of the portfolio's returns are retained, contributing to long-term growth.

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