A balanced portfolio with strong US focus and moderate international diversification

Report created on Dec 14, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio predominantly consists of two Vanguard ETFs, with an 80% allocation to the Total Stock Market Index Fund and 20% to the Total International Stock Index Fund. This structure leans heavily towards equities, with minimal cash and other asset types. Such a composition suggests a focus on capital growth, leveraging the broad exposure these ETFs provide to both domestic and international markets. This setup is beneficial for investors seeking simplicity and broad market coverage. However, the high equity concentration suggests potential volatility, especially in turbulent markets. Consider diversifying into other asset classes, such as bonds or real estate, to mitigate risk and enhance stability.

Growth Info

Historically, the portfolio has shown a strong compound annual growth rate (CAGR) of 12.57%, with a significant drawdown of -34.78%. This indicates the potential for robust returns but also substantial downside risk during market downturns. The performance is concentrated, with 90% of returns occurring over just 30 days. This highlights the importance of timing and market conditions. It's crucial to understand that past performance doesn't guarantee future results. To manage risk, consider setting stop-loss orders or diversifying further to cushion against future downturns.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future performance, indicates a median projected return of 271.48%. While this suggests optimism, it's essential to remember that simulations are based on past data and can't predict future events or market shifts. With 977 out of 1,000 simulations showing positive returns, the outlook is generally favorable. However, it's wise to prepare for varied outcomes, especially given the 5th percentile projection of only 24.87%. Regularly reviewing and adjusting your portfolio in response to market changes can help manage expectations and risks.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising 99.53% of the allocation, with negligible cash and other assets. This concentration in equities can drive growth but also increases exposure to market volatility. Having a diversified asset base typically helps in spreading risk and stabilizing returns. Consider incorporating other asset classes like fixed income or alternative investments to balance the risk-return profile. This diversification can provide a buffer during market downturns and offer more consistent performance over time.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation reveals a strong focus on technology, financial services, and healthcare, which together form over 50% of the portfolio. While these sectors have historically driven growth, they can also be cyclical and sensitive to economic shifts. A well-balanced sector allocation can help manage sector-specific risks and capture opportunities across different economic cycles. Consider spreading investments more evenly across sectors like consumer defensive or utilities to enhance stability and reduce dependence on a few high-performing sectors.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asien Schwellenländer
    3%
  • Japan
    3%
  • Asien
    2%
  • Australasia
    1%
  • Afrika/Mittlerer Osten
    1%

Geographically, the portfolio is heavily skewed towards North America, accounting for over 81% of the allocation. This indicates a strong reliance on the US market, which can be advantageous given its historical performance but also risky if the US market underperforms. International exposure, though present, is limited, potentially missing out on growth opportunities in emerging markets. To enhance geographic diversification, consider increasing exposure to regions like Asia or Europe, which can provide growth potential and reduce reliance on any single market.

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 benefit from optimization using the Efficient Frontier, which involves adjusting asset weights to achieve the best possible risk-return trade-off. While the current allocation is broadly diversified, slight adjustments could enhance efficiency. For instance, reallocating a small portion from equities to bonds might improve the risk-return ratio without drastically altering the portfolio's growth potential. Remember, optimization is about finding the right balance for your specific goals and risk tolerance, not just chasing returns.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.56%

The portfolio yields an average dividend of 1.56%, with the international ETF contributing a higher yield of 3.0% compared to the domestic ETF's 1.2%. Dividends can provide a steady income stream and contribute to total returns, especially in flat or declining markets. It's essential to consider the role of dividends in your overall investment strategy, particularly if income generation is a goal. Reinvesting dividends can also enhance long-term growth through compounding. Evaluate whether increasing exposure to higher-yielding assets aligns with your income needs and risk tolerance.

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 total expense ratio (TER) is a low 0.04%, reflecting the cost-effectiveness of the Vanguard ETFs. Low costs are crucial for maximizing long-term returns, as high fees can erode gains over time. It's important to regularly review your portfolio's costs and explore cheaper alternatives if necessary. While the current cost structure is efficient, always be on the lookout for opportunities to reduce expenses further, such as through commission-free trading platforms or tax-efficient investment strategies.

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