A balanced and broadly diversified portfolio with low costs and strong historical performance

Report created on Jan 21, 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 significantly composed of two ETFs: 80% in Vanguard Total Stock Market Index Fund and 20% in Vanguard Total International Stock Index Fund. Both ETFs provide broad exposure to U.S. and international equities, respectively. Compared to a typical balanced portfolio, this allocation leans heavily towards equities, offering potential for higher returns but also increased volatility. A typical benchmark for a balanced portfolio might include a mix of equities and fixed income. Consider diversifying into other asset classes like bonds to mitigate risk and stabilize returns, especially during market downturns.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 12.19%, indicating strong growth over time. However, it has also experienced a maximum drawdown of -34.74%, reflecting potential volatility during market downturns. Compared to a benchmark, such as the S&P 500, this performance is commendable but comes with high risk. While historical performance can guide expectations, it's essential to remember that past performance doesn't guarantee future results. Consider maintaining a balanced approach to manage risk and return effectively.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows a 5th percentile return of 11.7% and a 50th percentile return of 232.2%. This suggests a wide range of potential outcomes, highlighting the uncertainty in future performance. With 968 out of 1,000 simulations showing positive returns, the portfolio demonstrates a strong likelihood of profitability. However, it's important to remember that simulations are based on historical data and assumptions, which may not reflect future market conditions. Regularly review and adjust your portfolio to align with changing market trends and personal financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards equities, with 99% in stocks and only 1% in cash. This allocation provides significant growth potential but also exposes the portfolio to greater volatility. Compared to a balanced benchmark, which might include a mix of stocks and bonds, this portfolio is more aggressive. A more diversified asset class allocation could help manage risk and provide more stable returns. Consider incorporating bonds or other fixed-income assets to create a more balanced risk-return profile, especially if nearing retirement or requiring more stability.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is tech-heavy, with 28% in technology, followed by financial services at 15%. This concentration aligns with current market trends but may increase volatility, especially during interest rate hikes. Compared to a typical benchmark, this allocation reflects a strong growth orientation. While technology can drive returns, it's essential to balance this with exposure to other sectors to mitigate sector-specific risks. Consider reviewing sector allocations periodically to ensure they align with your risk tolerance and investment goals, potentially adjusting to reduce overexposure to any single sector.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, with 81% exposure, while international exposure is limited. This allocation aligns with typical U.S.-centric benchmarks but lacks global diversification. A more diversified geographic allocation could reduce risk associated with regional economic downturns. Consider increasing exposure to emerging markets or other developed regions to enhance diversification. This can help balance potential risks and returns, especially given the dynamic nature of global markets and the varying growth prospects across different regions.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    31%
  • Mid-cap
    19%
  • Small-cap
    6%
  • Micro-cap
    2%

The portfolio's market capitalization is skewed towards mega and big-cap stocks, comprising 72% of the allocation. This focus on larger companies provides stability and lower volatility compared to smaller caps, which can be more volatile but offer higher growth potential. Compared to a benchmark, this allocation aligns with common investment strategies that prioritize stability. Consider balancing the portfolio with a mix of small and mid-cap stocks to capture growth opportunities and diversify risk. This can enhance the portfolio's overall performance by benefiting from the growth of smaller, potentially more dynamic companies.

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 could be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. This involves adjusting the allocation between the existing ETFs to achieve maximum returns for a given level of risk. While the current allocation is well-balanced, slight adjustments could enhance efficiency. Consider using optimization tools to explore potential allocation changes, ensuring they align with your risk tolerance and investment goals. Regularly review optimization opportunities to maintain an optimal balance between risk and return, adapting to changing market conditions and personal financial objectives.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.62%

The portfolio's dividend yield is 1.62%, with the Vanguard Total International Stock Index Fund contributing a higher yield of 3.30%. Dividends can provide a steady income stream and contribute to total returns, making them particularly valuable for income-focused investors. Compared to a benchmark, this yield is moderate, reflecting a growth-oriented portfolio. To enhance income, consider increasing exposure to dividend-paying stocks or funds. This can provide a balance between growth and income, especially if income generation is a primary investment goal. Regularly review dividend yields to ensure they align with your financial objectives.

Ongoing product costs Info

  • 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's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This low-cost structure supports better long-term performance by minimizing expenses that can erode returns. Compared to industry averages, these costs are exceptionally competitive and align with best practices for cost-efficient investing. Maintaining low costs is crucial for maximizing net returns over time. Regularly review and compare expense ratios to ensure they remain competitive. Consider maintaining this low-cost strategy to enhance long-term growth and optimize overall portfolio performance.

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