A balanced portfolio with a strong focus on US equities and consumer defensive sector

Report created on Jan 20, 2025

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 heavily weighted towards US equities, with a significant allocation to the Vanguard S&P 500 ETF at 50.45% and Costco Wholesale Corp at 32.48%. The remaining 17.07% is in the Vanguard Total International Stock Index Fund ETF, providing some international exposure. The portfolio is predominantly composed of stocks, with a minor cash position. This composition suggests a focus on equity growth, aligning with a balanced risk profile. While the US focus provides stability, consider increasing international exposure to enhance diversification and potentially reduce regional risk.

Growth Info

The portfolio has demonstrated robust historical performance, with a Compound Annual Growth Rate (CAGR) of 15.85%. This impressive growth rate indicates effective past asset selection and allocation. However, the portfolio also experienced a maximum drawdown of -24.43%, highlighting potential volatility during market downturns. Comparing to benchmarks, this performance aligns well with typical equity-heavy portfolios. While past performance is promising, it's essential to remember that it doesn't guarantee future results. To mitigate future risks, consider maintaining a diversified asset allocation that can weather various market conditions.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes. With a median expected return of 539.1%, the projections reflect the portfolio's historical growth trend. However, simulations also show a 5% chance of returns as low as 97.5%, underscoring the inherent uncertainty in future performance. Monte Carlo simulations use historical data to project these outcomes, which may not account for unprecedented market events. To prepare for varied scenarios, consider stress-testing the portfolio against different economic conditions and adjusting allocations as needed.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily skewed towards equities, comprising 99% of the allocation, with a minor 1% in cash. This concentration in stocks suggests a strong growth orientation, typical for investors seeking capital appreciation. However, the lack of fixed-income assets or other asset classes may limit diversification benefits and expose the portfolio to equity market volatility. To enhance stability, consider incorporating a small allocation to bonds or alternative assets, which can provide a hedge against stock market downturns and potentially smooth out returns over time.

Sectors Info

  • Consumer Staples
    36%
  • Technology
    19%
  • Financials
    10%
  • Consumer Discretionary
    7%
  • Health Care
    7%
  • Industrials
    6%
  • Telecommunications
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is dominated by consumer defensive stocks at 36%, followed by technology at 19%. This concentration in consumer defensives offers stability during economic downturns, as these companies provide essential goods. However, the tech sector's volatility could introduce higher risk, especially during interest rate fluctuations. The remaining sectors are more evenly distributed, providing some diversification. To balance sector exposure, consider adjusting allocations to include sectors that may benefit from current economic trends, while maintaining a core focus on stable, defensive industries.

Regions Info

  • North America
    84%
  • Europe Developed
    7%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, with 84% exposure. While this aligns with the investor's region and offers familiarity and stability, it may limit global diversification. The remaining exposure is spread across Europe, Asia, and other regions, but is relatively minor. To mitigate regional risk and capture growth opportunities abroad, consider increasing allocations to emerging markets or other underrepresented regions. This can enhance diversification and potentially improve risk-adjusted returns by tapping into global economic growth.

Market capitalization Info

  • Mega-cap
    64%
  • Large-cap
    23%
  • Mid-cap
    12%
  • Small-cap
    1%

The portfolio's market capitalization is predominantly in mega-cap stocks at 64%, with a healthy mix of big and medium-cap stocks. This allocation favors large, established companies, providing stability and lower volatility. The minimal exposure to small and micro-cap stocks suggests a conservative approach, focusing on reliability over potential high-risk, high-reward opportunities. While large-cap dominance aligns with the portfolio's balanced risk profile, consider a modest increase in small-cap exposure to capture growth potential and enhance diversification across different company sizes.

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 is well-positioned on the Efficient Frontier, indicating an optimal risk-return balance given the current asset allocation. This means it achieves the best possible returns for the level of risk taken. However, the Efficient Frontier is based on historical data and current assets, and may not account for future market changes. To maintain this optimization, regularly review asset allocations and adjust as necessary to respond to evolving market conditions. This proactive approach helps ensure the portfolio remains efficient and aligned with investment objectives.

Dividends Info

  • Costco Wholesale Corp 0.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.35%

The portfolio's dividend yield stands at 1.35%, with contributions from Costco Wholesale Corp, the Vanguard S&P 500 ETF, and the Vanguard Total International Stock Index Fund ETF. This yield provides a modest income stream, which can be appealing for investors seeking regular cash flow in addition to capital appreciation. While the yield is not particularly high, it aligns with the growth-oriented nature of the portfolio. To boost income, consider reallocating a portion of the portfolio to higher-yielding dividend stocks or funds, balancing the need for income with growth objectives.

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) 0.03%

The portfolio benefits from impressively low costs, with an overall Total Expense Ratio (TER) of 0.03%. This low cost structure supports better long-term performance by minimizing the drag on returns. The use of Vanguard ETFs, known for their low fees, contributes to this cost efficiency. Keeping costs low is crucial for maximizing net returns over time. Continue to monitor and manage expenses by choosing low-cost investment vehicles and periodically reviewing the portfolio to ensure it remains cost-effective while meeting investment goals.

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