Balanced Risk Portfolio with Strong Diversification and Low Costs for Long-Term Growth

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 suitable for a moderately risk-tolerant investor seeking long-term growth. Such an investor values broad diversification across asset classes, sectors, and geographies while maintaining low costs. Their investment horizon is likely longer, allowing them to weather short-term market fluctuations in pursuit of capital appreciation. This investor appreciates the balance of growth potential and stability, making them comfortable with a predominantly equity-focused portfolio complemented by a small bond allocation for income and risk mitigation.

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 of four Vanguard ETFs with a strong focus on equities. The Vanguard S&P 500 ETF holds the largest share at 55%, followed by the Vanguard Total Stock Market Index Fund ETF Shares at 25%. The Vanguard Total International Stock Index Fund ETF Shares makes up 15%, while the Vanguard Total Bond Market Index Fund ETF Shares accounts for 5%. This diversified mix provides a broad exposure to both domestic and international markets, with a small allocation to bonds. The balanced nature of this portfolio aligns well with a moderate risk tolerance and long-term growth objectives.

Growth Info

Historically, the portfolio has delivered a solid CAGR of 12.09%, indicating strong growth over time. However, it has experienced a significant max drawdown of -33.04%, which highlights the potential for volatility in market downturns. The 30 days that make up 90% of returns suggest that the portfolio's performance is driven by a few key periods. This performance history indicates a good balance between risk and return, suitable for investors who can withstand short-term fluctuations for long-term gains.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected with a hypothetical initial investment. The results show a wide range of potential outcomes, with a 5th percentile return of 16.76% and a 67th percentile return of 278.39%. The median outcome suggests a return of 195.34%, with 976 simulations showing positive returns. The annualized return across all simulations is 9.19%, indicating a favorable outlook for long-term growth, albeit with some risk of variability in returns.

Asset classes Info

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

The portfolio is heavily weighted towards equities, with stocks comprising 94.68% of the total allocation. Bonds make up 4.94%, providing some stability and income potential. The minimal allocation to cash and other categories indicates a focus on growth rather than liquidity or alternative investments. This asset class distribution suggests a growth-oriented strategy with a moderate level of risk, suitable for investors seeking capital appreciation over time.

Sectors Info

  • 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%

The portfolio is diversified across several sectors, with the largest allocations in Technology (27.81%), Financial Services (13.54%), and Healthcare (10.41%). This sector allocation provides exposure to industries with growth potential and stability. However, the heavy concentration in technology may increase volatility, as this sector is often more sensitive to market changes. To mitigate this risk, consider periodically reviewing sector allocations to ensure alignment with risk tolerance and market conditions.

Regions Info

  • 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 focused on North America, which accounts for 80.72% of the allocation. This concentration offers strong exposure to the US market but may limit diversification benefits from international markets. Europe Developed, Asia Emerging, and Japan contribute smaller portions to the portfolio, providing some international diversification. Consider monitoring geographic allocations to ensure a balanced exposure that aligns with global market trends and personal investment goals.

Redundant positions Info

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

The portfolio exhibits high correlation between the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. This indicates that these assets tend to move in the same direction, which could reduce diversification benefits. While this correlation may lead to increased returns during market upswings, it also suggests heightened risk during downturns. To enhance diversification, consider periodically reviewing asset correlations and adjusting allocations to reduce overlap and improve risk management.

Dividends Info

  • 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 offers a moderate total dividend yield of 1.62%, with contributions from all ETF holdings. The Vanguard Total Bond Market Index Fund ETF Shares provides the highest yield at 3.6%, offering income potential alongside growth. The Vanguard Total International Stock Index Fund ETF Shares also contributes a solid yield of 3.0%. While the dividend yield is not the primary focus of this portfolio, it provides a steady income stream that can enhance total returns over time.

Ongoing product costs Info

  • 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 benefits from low costs, with an overall Total Expense Ratio (TER) of 0.04%. This is achieved through the use of Vanguard ETFs, known for their cost-effectiveness. The Vanguard Total Bond Market Index Fund ETF Shares, Vanguard S&P 500 ETF, and Vanguard Total Stock Market Index Fund ETF Shares each have an expense ratio of 0.03%, while the Vanguard Total International Stock Index Fund ETF Shares is slightly higher at 0.08%. Keeping costs low is crucial for maximizing net returns, making this portfolio an efficient choice for cost-conscious investors.

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.

The current portfolio shows a good balance between risk and return, aligning with the efficient frontier. However, the presence of highly correlated assets like the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares may limit diversification benefits. To optimize the portfolio, consider reviewing asset correlations and sector allocations to ensure they align with personal risk tolerance and investment goals. While optimization is not immediately necessary, periodic reviews can help maintain an efficient portfolio over time.

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