A balanced portfolio with a strong focus on US equities and growth potential

Report created on Jul 14, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is evenly split between two major ETFs: the Vanguard S&P 500 Index ETF and the Vanguard Growth Portfolio. Each holds 50% of the total portfolio. This structure implies a heavy emphasis on US equities, with a focus on large-cap stocks and growth-oriented investments. Such a composition offers potential for capital appreciation, although it may lack diversification across different asset types. It's essential to consider how this concentration aligns with your financial goals. Diversifying into other asset classes like bonds or international equities could provide more balance and reduce risk.

Growth Info

Historically, this portfolio has delivered a compound annual growth rate (CAGR) of 12.84%. This indicates a strong performance, likely driven by the robust growth of the US equity market over recent years. However, the maximum drawdown of -26.41% highlights the potential volatility and risk during market downturns. It's crucial to understand that past performance is not indicative of future results. While historical data provides valuable insights, it does not guarantee future success. Balancing the pursuit of high returns with the ability to withstand market fluctuations is key to long-term investment success.

Projection Info

Using Monte Carlo simulations, which analyze potential future performance based on historical data, the portfolio shows promising projections. With 1,000 simulations, the median (50th percentile) outcome suggests a potential portfolio growth of 446.21%. However, the 5th percentile indicates a lower growth scenario of 117.66%, showing the range of possible outcomes. While these simulations provide a statistical forecast of future performance, they are based on historical trends, which may not fully capture future market conditions. It's advisable to use these projections as one of many tools in your decision-making process.

Asset classes Info

  • US Equity
    68%
  • Stocks
    12%
  • Bonds
    10%

The portfolio's asset allocation is predominantly in US equities at 68.02%, followed by general equities, bonds, and minimal cash holdings. This heavy tilt towards equities suggests a focus on growth, with bonds providing some stability. Such an allocation is typical for investors seeking capital appreciation over income. However, the limited exposure to bonds and other asset classes may increase vulnerability to market volatility. To enhance diversification, consider incorporating more fixed-income securities or alternative investments, which could help stabilize returns during market downturns.

Sectors Info

  • Technology
    27%
  • Financials
    17%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation within this portfolio is notably concentrated in technology (26.51%) and financial services (16.91%), with smaller allocations to other sectors like industrials and consumer cyclicals. This concentration suggests a reliance on the performance of these sectors, which have been historically volatile. While sector concentration can drive returns during favorable conditions, it also increases risk if these sectors underperform. To mitigate this risk, consider rebalancing to achieve a more even distribution across sectors, which can help cushion the portfolio against sector-specific downturns.

Regions Info

  • North America
    88%
  • Europe Developed
    5%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

The portfolio is heavily weighted towards North American assets, accounting for 87.79% of geographic exposure. This focus may limit the benefits of international diversification, which can provide a hedge against region-specific economic downturns. With minimal exposure to other regions like Europe and Asia, the portfolio might miss out on growth opportunities in emerging markets. Expanding geographic diversification could enhance the portfolio's resilience and growth potential by tapping into different economic cycles and reducing reliance on a single region.

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 can be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio based on current assets. This involves adjusting the allocation between the two ETFs to maximize returns for a given level of risk. While this optimization focuses on efficiency, it doesn't necessarily guarantee diversification or alignment with personal goals. Regularly reviewing the portfolio's allocation and making adjustments as needed can help maintain optimal performance. Consider consulting with a financial advisor to tailor the portfolio to your specific risk tolerance and objectives.

Dividends Info

  • Vanguard S&P 500 Index ETF 0.70%
  • Vanguard Growth Portfolio 1.80%
  • Weighted yield (per year) 1.25%

The portfolio's dividend yield is relatively modest at 1.25%, with contributions from the Vanguard S&P 500 Index ETF and the Vanguard Growth Portfolio. While dividends can provide a steady income stream, this portfolio's focus is more on growth than income generation. For those seeking higher income, it may be beneficial to explore investments with higher dividend yields or consider dividend-focused ETFs. Balancing growth and income is important, especially for investors nearing retirement or those needing regular cash flow.

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