Balanced Diversified Portfolio with Strong Global Exposure and Low Costs for Moderate Risk Tolerance Investors

Report created on Nov 28, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 80% in the Vanguard Total World Stock Index Fund ETF and 20% in the Vanguard Total World Bond ETF. This composition provides a balanced approach, combining growth potential from stocks with the stability of bonds. The high equity allocation suggests a focus on long-term growth, while the bond portion offers some protection against volatility. To maintain this balance, it's essential to periodically review and rebalance the portfolio to ensure it aligns with the investor's risk tolerance and financial goals.

Growth Info

Historically, the portfolio has shown a strong CAGR of 9.67%, indicating robust growth over time. However, it also experienced a significant max drawdown of -28.06%, highlighting the inherent volatility of a stock-heavy portfolio. This performance suggests that while the portfolio can deliver substantial returns, it also requires a willingness to endure short-term fluctuations. Investors should be prepared for periods of negative returns and ensure they have a long-term investment horizon to ride out these downturns.

Projection Info

Using a Monte Carlo simulation, which models potential future portfolio performance based on historical data, the portfolio shows promising growth prospects. Assuming a hypothetical initial investment, the 50th percentile projection is a 127.29% return, while the 67th percentile suggests a 194.96% return. With 946 out of 1,000 simulations yielding positive returns, the portfolio demonstrates a favorable risk-reward ratio. However, investors should remain aware of the potential for negative outcomes, as indicated by the 5th percentile projection of -1.93%.

Asset classes Info

  • Stocks
    79%
  • Bonds
    20%
  • Cash
    1%

The portfolio is diversified across two primary asset classes: stocks and bonds, with a small allocation to cash and other assets. This diversification helps mitigate risk by spreading investments across different asset types. The heavy tilt towards stocks suggests a focus on capital appreciation, while the bond allocation provides income and stability. To maintain this balance, investors should periodically assess their risk tolerance and adjust allocations as needed to ensure alignment with their financial objectives.

Sectors Info

  • Technology
    19%
  • Financials
    13%
  • Industrials
    9%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is well-diversified, with the largest exposure in Technology at 19.44%, followed by Financial Services and Industrials. This spread across multiple sectors reduces the risk of overexposure to any single industry. However, the portfolio's heavy reliance on technology stocks could increase volatility, especially during market downturns. Investors should consider monitoring sector allocations to ensure they remain comfortable with the level of risk associated with each sector, adjusting as necessary to align with their risk tolerance.

Regions Info

  • North America
    52%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for over 51% of the allocation. There's also significant exposure to developed markets in Europe and Asia, with smaller allocations to emerging markets. This global diversification helps reduce region-specific risks and provides access to growth opportunities worldwide. However, the heavy North American focus could lead to concentration risk. Investors might consider periodically reviewing geographic allocations to ensure a balanced global exposure that aligns with their investment goals.

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 optimization chart suggests that the current allocation is well-positioned along the efficient frontier, balancing risk and return. Investors can consider shifting more towards bonds for a conservative approach or increasing equity exposure for higher risk and potential returns. However, given the portfolio's already balanced nature, the focus should remain on maintaining diversification and cost efficiency. Before making any changes, investors should reassess their risk tolerance and investment goals to ensure alignment with their financial strategy.

Dividends Info

  • Vanguard Total World Bond ETF 4.10%
  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Weighted yield (per year) 2.26%

The portfolio's dividend yield stands at 2.26%, with the bond ETF contributing 4.1% and the stock ETF 1.8%. This yield provides a steady income stream, which can be reinvested to compound returns or used as a source of cash flow. A focus on dividend-paying investments can help enhance total returns and provide a buffer during market volatility. Investors should consider the role of dividends in their financial strategy and ensure that their portfolio's income-generating potential aligns with their investment goals and cash flow needs.

Ongoing product costs Info

  • Vanguard Total World Bond ETF 0.05%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is a low 0.07%, reflecting the cost-efficient nature of the Vanguard ETFs. Low costs are crucial for maximizing returns, as high fees can significantly erode investment gains over time. This cost efficiency aligns well with the goal of achieving long-term growth. Investors should continue to prioritize low-cost investment options and remain vigilant about any changes in fees that could impact portfolio performance. Regularly reviewing and comparing costs can help ensure the portfolio remains cost-effective.

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