A balanced portfolio with strong US focus and moderate sector diversification

Report created on Dec 24, 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 heavily weighted towards the Vanguard S&P 500 ETF, making up 70% of the portfolio. The remaining allocations are 20% in the Vanguard Value Index Fund ETF and 10% in the Vanguard FTSE All-World ex-US ETF. This composition leans significantly towards US equities, which is typical for many US-based investors. While this structure offers solid exposure to large-cap US stocks, it may benefit from further diversification to include more international or alternative asset classes to potentially enhance risk-adjusted returns.

Growth Info

Historically, the portfolio has performed well with a compound annual growth rate (CAGR) of 12.65%. This indicates strong growth over time, outperforming many traditional benchmarks. The maximum drawdown of -34.35% reflects the risk of potential losses during market downturns. Although past performance is not indicative of future results, understanding these metrics can help set realistic expectations. Consider maintaining a diversified approach to mitigate similar drawdowns in the future.

Projection Info

The Monte Carlo simulation projects a range of potential outcomes using historical data. With 1,000 simulations, the portfolio shows a 67th percentile return of 380.23%, indicating a favorable growth scenario. However, the 5th percentile return is only 26.77%, showing possible downside risks. While these projections provide insight into potential future performance, they rely on historical data and assumptions, which may not always hold true. Regularly reviewing and adjusting the portfolio can help align with changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, accounting for nearly 100% of the allocation. This heavy equity exposure can drive growth but also increases volatility. Typically, a balanced portfolio includes a mix of stocks, bonds, and other asset classes to reduce risk. Diversifying into fixed income or alternative investments could provide stability and reduce the impact of equity market fluctuations, enhancing the portfolio’s risk-return profile.

Sectors Info

  • Technology
    27%
  • Financials
    16%
  • Health Care
    12%
  • Industrials
    9%
  • Consumer Discretionary
    9%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    4%
  • Utilities
    3%
  • Basic Materials
    2%
  • Real Estate
    2%

Sector allocation is led by technology (26.68%), followed by financial services and healthcare. This sector concentration aligns with global benchmarks, suggesting a balanced approach. However, tech-heavy portfolios might experience higher volatility during economic shifts, such as interest rate changes. Ensuring sector diversification can help mitigate risks associated with sector-specific downturns. Consider reviewing sector weights periodically to maintain a balanced exposure.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America, with 90.13% exposure. This is common for US-based investors but limits diversification benefits. Adding more international exposure can help mitigate regional risks and capitalize on growth opportunities in other markets. Balancing geographic allocation can enhance diversification and provide a buffer against US-specific economic downturns.

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 with its current assets. This involves adjusting allocations to achieve maximum returns for a given level of risk. Although the portfolio is already balanced, exploring optimization techniques can further enhance performance. This would ensure that the portfolio remains aligned with the investor’s risk tolerance and return objectives.

Dividends Info

  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 1.60%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Value Index Fund ETF Shares 1.70%
  • Weighted yield (per year) 1.13%

The portfolio’s dividend yield is 1.13%, supported by the Vanguard Value Index Fund ETF's 1.7% yield. Dividends provide a steady income stream and can enhance total returns, especially during volatile markets. For investors seeking income, focusing on dividend-paying assets might be beneficial. While dividends can be an attractive feature, they should be balanced with growth objectives to ensure alignment with overall investment goals.

Ongoing product costs Info

  • Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.04%. This is impressively low, supporting better long-term performance by minimizing the drag on returns. Keeping costs low is crucial, as fees can significantly impact compounded growth over time. Continuously monitoring and optimizing for cost efficiency can enhance net returns, making this a strong aspect of the portfolio.

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