Balanced and Broadly Diversified Portfolio with a Strong Focus on U.S. Equities and Low Costs

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio is ideal for an investor who values a balanced approach with moderate risk tolerance. They likely have a long-term investment horizon and are seeking growth through a diversified mix of equities and bonds. The investor might prioritize low costs and passive management, appreciating the broad market exposure provided by ETFs. They are comfortable with some market volatility but prefer a portfolio that offers a degree of stability through diversification. This investor is focused on achieving steady growth while minimizing unnecessary risks.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    55.00%
  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    25.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    15.00%
  • Vanguard Total Bond Market Index Fund ETF Shares
    BND - US9219378356
    5.00%

The portfolio is composed primarily of ETFs, with a strong emphasis on U.S. equities, as evidenced by the 55% allocation to the Vanguard S&P 500 ETF. The inclusion of the Vanguard Total Stock Market Index Fund and the Vanguard Total International Stock Index Fund provides a broader exposure to both domestic and international markets. A small allocation to the Vanguard Total Bond Market Index Fund adds some stability to the portfolio. This composition is well-suited for investors seeking a balanced approach, offering growth potential while maintaining some level of risk management through diversification.

Growth

Historically, the portfolio has shown a solid performance with a compound annual growth rate (CAGR) of 11.57%. This suggests strong growth potential over the long term, albeit with a maximum drawdown of -33.0%, which indicates vulnerability to market downturns. It's important for investors to understand that while the portfolio has performed well historically, past performance does not guarantee future results. To mitigate risks, it would be prudent to periodically review the portfolio's performance and make adjustments as necessary, ensuring it aligns with the investor's financial goals and risk tolerance.

Projection

A Monte Carlo simulation, which uses random sampling to model potential future outcomes, was conducted with 1,000 simulations. The results indicate a median end portfolio value of 202.2% from a hypothetical initial investment, with a 9.11% annualized return across all simulations. This suggests a favorable outlook, though there is still a 5% chance of achieving only a 5.24% return. Investors should consider these projections as a guide rather than a certainty, and it may be beneficial to maintain a diversified approach to mitigate potential risks and capitalize on growth opportunities.

Asset classes

  • Stocks
    95%
  • Bonds
    5%
  • Cash
    0%
  • Other
    0%
  • No data
    0%

The portfolio is heavily weighted towards stocks, with approximately 94.68% in equities, providing significant growth potential. The small allocation to bonds, at 4.94%, offers some level of risk mitigation, although it may not be sufficient to fully cushion against market volatility. Investors should consider their risk tolerance and financial goals when evaluating this allocation. If stability is a priority, increasing the bond allocation could help balance the portfolio. Conversely, if growth is the main objective, maintaining the current allocation could be appropriate.

Sectors

  • Technology
    28%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation within the portfolio is diverse, with a notable emphasis on technology, financial services, and healthcare, which together account for over 50% of the portfolio. This concentration may enhance growth potential, given the historical performance of these sectors. However, it also introduces sector-specific risks. To further mitigate these risks, investors might consider periodically reviewing sector allocations and ensuring they align with their risk tolerance and market outlook. Diversifying across additional sectors could provide a more balanced risk-return profile.

Regions

  • North America
    81%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    0%
  • Europe Emerging
    0%

Geographically, the portfolio is predominantly invested in North American assets, representing over 80% of the total allocation. This concentration offers exposure to one of the world's largest markets, potentially enhancing growth prospects. However, it also introduces geographic risk, as the portfolio is heavily reliant on the U.S. market's performance. To reduce this risk, investors might consider diversifying further into international markets, which could provide exposure to different economic cycles and growth opportunities, thereby enhancing overall portfolio resilience.

Redundant positions

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

The portfolio exhibits a high correlation between the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. This correlation suggests that these assets tend to move in the same direction, which can amplify both gains and losses. While this can be beneficial in a rising market, it also increases vulnerability during downturns. To mitigate this risk, investors could explore diversifying into less correlated assets, which can help stabilize returns and reduce overall portfolio volatility.

Dividends

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.62%

The portfolio's dividend yield stands at 1.62%, with contributions from both stock and bond holdings. The Vanguard Total Bond Market Index Fund ETF Shares provides the highest yield at 3.6%, offering a steady income stream. While the yield is modest, it can still contribute to overall returns, particularly in low-interest-rate environments. Investors seeking higher income might consider increasing their allocation to higher-yielding assets, though this should be balanced against the potential for increased risk and volatility.

Ongoing product costs

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

The portfolio boasts an impressively low total expense ratio (TER) of 0.04%, thanks to the cost-efficient nature of the Vanguard ETFs. This low cost structure is advantageous for long-term investors, as it helps maximize net returns by minimizing fees. Keeping investment costs low is a key principle of successful investing, and this portfolio is well-positioned in that regard. Investors should continue to monitor expense ratios and seek to maintain a cost-effective approach, ensuring that fees do not erode potential returns over time.

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