A conservative portfolio with a strong bond focus and moderate global diversification

Report created on Dec 20, 2024

Risk profile Info

2/7
Conservative
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is composed predominantly of bonds, with the Vanguard Total Bond Market Index Fund ETF Shares making up 45% of the allocation. Stocks account for 30%, primarily through the Vanguard Total Stock Market Index Fund. The remaining 25% is split between developed markets, short treasury bonds, and real estate ETFs. Compared to typical conservative portfolios, this one has a slightly higher allocation to equities, which may offer greater potential for growth but also increases risk. Consider whether this balance aligns with your risk tolerance and investment goals, as conservative portfolios usually prioritize stability over growth.

Growth Info

Historically, the portfolio has shown a Compound Annual Growth Rate (CAGR) of 6.08%, which is reasonable for a conservative strategy. The maximum drawdown was -22.24%, indicating the potential loss during market downturns. Although this drawdown is significant, it is not uncommon in volatile markets. The portfolio's performance is relatively stable, with 90% of returns occurring over just 27 days, suggesting concentrated periods of gains. While past performance does not guarantee future results, understanding these trends can help set expectations for future market conditions.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future performance, indicates a 6.26% annualized return across 1,000 simulations. The 5th percentile shows a potential loss of 20.61%, while the median (50th percentile) suggests a return of 102.15%. Although simulations provide a range of possible outcomes, they are not foolproof and rely on historical data that may not predict future events. This tool can guide expectations but should be used alongside other analyses when planning for future investments.

Asset classes Info

  • Bonds
    46%
  • Stocks
    45%
  • Real Estate
    5%
  • Cash
    4%

The portfolio is well-diversified across four main asset classes: bonds, stocks, real estate, and cash. Bonds dominate the allocation, reflecting a conservative approach that prioritizes income and stability. Stocks provide growth potential, while real estate and cash offer additional diversification. Compared to benchmark norms, this allocation is typical for conservative portfolios, focusing on minimizing volatility. Ensure this balance aligns with your financial objectives, as each class contributes differently to risk and return.

Sectors Info

  • Technology
    11%
  • Financials
    7%
  • Real Estate
    6%
  • Industrials
    5%
  • Health Care
    5%
  • Consumer Discretionary
    5%
  • Telecommunications
    3%
  • Consumer Staples
    3%
  • Energy
    2%
  • Basic Materials
    2%
  • Utilities
    1%

Sector allocation is moderately diversified, with technology, financial services, and real estate being the largest sectors. Technology, at 10.79%, could introduce volatility, especially during economic shifts. Financial services and real estate provide stability and income potential. This sector composition aligns well with benchmarks, ensuring a balanced exposure to various economic segments. Keep an eye on sector trends, as shifts in economic policies or market conditions can impact sector performance and portfolio returns.

Regions Info

  • North America
    37%
  • Europe Developed
    8%
  • Japan
    3%
  • Australasia
    1%
  • Asia Developed
    1%

Geographic exposure is primarily in North America (36.51%), with smaller allocations in Europe, Japan, and other regions. This focus on North America aligns with common benchmarks but may limit exposure to growth opportunities in emerging markets. While this provides stability, consider whether increasing international exposure could enhance diversification and potential returns. Balancing domestic and international assets can help mitigate risks associated with regional economic downturns or political instability.

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 close to the Efficient Frontier, indicating a good balance between risk and return given the current assets. By adjusting the allocation slightly, it may be possible to achieve a more optimal risk-return ratio. This doesn't necessarily mean diversifying further but reallocating between existing assets. Regularly reassessing the portfolio's position relative to the Efficient Frontier can help ensure it remains aligned with your investment objectives and risk tolerance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • iShares Short Treasury Bond ETF 4.60%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard Real Estate Index Fund ETF Shares 4.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 2.72%

With a total dividend yield of 2.72%, this portfolio provides a steady income stream, particularly through bond and real estate ETFs. These dividends can be a reliable source of income, especially for conservative investors prioritizing stability. In comparison to growth-focused portfolios, this yield is relatively high, offering a cushion during volatile market periods. Consider reinvesting dividends to enhance compounding returns or using them for income, depending on your financial needs and goals.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • iShares Short Treasury Bond ETF 0.15%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, keeping costs minimal and supporting better long-term returns. Low fees are crucial in maximizing investment growth, as they reduce the drag on returns over time. This cost efficiency aligns well with best practices, ensuring that more of your money is working for you. Regularly review expense ratios and consider replacing higher-cost assets with lower-cost alternatives to maintain cost-effectiveness.

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