Balanced portfolio with strong US focus and low-cost diversified ETFs
Report created on Apr 18, 2025Risk profile
4/7
Diversification profile
5/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 60.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 35.00% -
VB Vanguard Total Bond Market Index Fund Admiral Shares
VBTLX - US9219376038 5.00%
The portfolio is predominantly composed of equities, with 60% in the Vanguard S&P 500 ETF and 35% in the Vanguard Total International Stock Index Fund ETF Shares. A modest 5% is allocated to bonds via the Vanguard Total Bond Market Index Fund Admiral Shares. This composition reflects a balanced approach, with a strong emphasis on equities for growth potential. Compared to a typical benchmark, this allocation leans heavily towards equities, which may increase volatility but also offers higher growth potential over the long term.
Growth
Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 9.83%, which is commendable. This performance indicates that the portfolio has effectively captured market gains, especially from US equities. However, it experienced a maximum drawdown of -32.62%, highlighting potential vulnerability during market downturns. Comparing this to benchmarks, the portfolio's performance aligns well with typical equity-heavy strategies, suggesting it has effectively harnessed market trends.
Projection
Using Monte Carlo simulations, which predict future performance by analyzing historical data, the portfolio shows a wide range of potential outcomes. The median outcome projects a 123.1% increase, while the worst-case scenario suggests an 11.7% decline. With 924 out of 1,000 simulations showing positive returns, the portfolio demonstrates a strong likelihood of future gains. However, it's important to note that these projections are based on historical data and cannot guarantee future results.
Asset classes
- Stocks 94%
- Bonds 5%
- Cash 1%
The portfolio's asset allocation is heavily skewed towards stocks, which comprise 94% of the total. Bonds make up just 5%, with the remaining 1% in cash. This allocation suggests a focus on growth through equities, with minimal exposure to bonds for stability. Compared to typical balanced portfolios, this is more aggressive, which can lead to higher returns but also increased volatility. Diversification across asset classes could be improved by adding more bonds or alternative investments.
Sectors
- Technology 23%
- Financials 16%
- Consumer Discretionary 10%
- Health Care 10%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
The sector allocation is diverse, with technology leading at 23%, followed by financial services at 16%. This sectoral spread is generally well-balanced, though the heavy tech exposure could introduce volatility, especially in times of interest rate changes. Compared to common benchmarks, the sector distribution aligns well, indicating a broad market exposure. However, monitoring sector trends and potential over-concentration in tech is advisable to maintain stability.
Regions
- North America 63%
- Europe Developed 14%
- Asia Emerging 5%
- Japan 5%
- No data 5%
- Asia Developed 4%
- Australasia 2%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is heavily weighted towards North America, accounting for 63% of the allocation. This reflects a strong home bias, which is common among US investors. While this has been beneficial given the strong performance of US markets, it may limit exposure to growth opportunities in other regions. Increasing allocations to emerging markets or underrepresented regions could enhance diversification and potentially improve returns.
Market capitalization
- Mega-cap 44%
- Large-cap 31%
- Mid-cap 17%
- Small-cap 2%
The portfolio is primarily invested in large-cap stocks, with 44% in mega caps and 31% in big caps. This focus on larger companies provides stability and lower volatility compared to small-cap stocks. However, the limited exposure to small (2%) and micro caps (0%) may restrict growth potential. Diversifying market capitalization exposure by including more mid-cap and small-cap stocks could enhance growth opportunities while managing risk.
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 potentially be optimized using the Efficient Frontier, a concept that helps identify the best possible risk-return ratio. By adjusting the allocation among existing assets, it may be possible to enhance returns for a given level of risk. However, this optimization focuses solely on the current assets and does not consider external factors such as market trends or economic conditions. Regular reviews are recommended to ensure alignment with changing market dynamics.
Dividends
- Vanguard Total Bond Market Index Fund Admiral Shares 3.40%
- Vanguard S&P 500 ETF 1.40%
- Vanguard Total International Stock Index Fund ETF Shares 3.20%
- Weighted yield (per year) 2.13%
The portfolio's overall dividend yield stands at 2.13%, with the Vanguard Total Bond Market Index Fund Admiral Shares offering the highest yield at 3.40%. Dividends contribute to steady income, which can be particularly appealing for investors seeking regular cash flow. While the current yield is modest, reinvesting dividends can significantly enhance long-term returns through compounding. Consider reviewing dividend policies to align with income goals.
Ongoing product costs
- Vanguard S&P 500 ETF 0.03%
- Vanguard Total International Stock Index Fund ETF Shares 0.05%
- Weighted costs total (per year) 0.04%
The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.04%. This low-cost structure is advantageous, as it minimizes the drag on returns over time. Compared to industry averages, these costs are impressively low, supporting better long-term performance. Maintaining this cost efficiency is crucial, as even small cost reductions can significantly impact net returns over extended periods.
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