Balanced and Diversified Portfolio with Strong US Focus and Moderate Risk

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio is well-suited for a balanced investor who seeks a mix of growth and stability. Such an investor typically has moderate risk tolerance and a medium to long-term investment horizon, aiming for capital appreciation while managing volatility. The portfolio's broad diversification across sectors and regions aligns with goals of achieving consistent returns while mitigating risks. Ideal for those comfortable with some market fluctuations, this investor values a diversified approach that balances domestic and international exposure, prioritizing growth with an eye on potential downturns.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    60.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    20.00%
  • Schwab International Small-Cap Equity ETF
    SCHC - US8085248883
    10.00%
  • Vanguard Small-Cap Index Fund ETF Shares
    VB - US9229087518
    10.00%

The portfolio is composed of four ETFs, with a significant 60% allocation to the Vanguard S&P 500 ETF. This high allocation to a single ETF indicates a strong focus on large-cap US equities. The remaining 40% is split among three other ETFs, providing exposure to international and small-cap stocks. This composition suggests a balanced approach, mixing domestic and international markets with a tilt towards larger, more stable companies. To enhance diversification, consider reducing the reliance on US large-cap stocks by incorporating more diverse asset classes or geographic regions.

Growth Info

Historically, the portfolio has shown a commendable compound annual growth rate (CAGR) of 11.36%. However, it experienced a maximum drawdown of -35.03%, indicating significant volatility during market downturns. This performance suggests that while the portfolio has potential for robust growth, it is also susceptible to market fluctuations. Understanding these historical trends is crucial for setting realistic expectations. To mitigate the impact of future downturns, consider diversifying further into less volatile asset classes, such as bonds, which can provide stability in turbulent times.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. Assuming a hypothetical initial investment, results showed a 50th percentile return of 211.82% and a 67th percentile return of 317.59%. The simulation indicates a strong likelihood of positive returns, with 955 simulations yielding gains. This analysis highlights potential future growth while also emphasizing the inherent uncertainty in investing. To better prepare for various outcomes, maintaining a well-balanced portfolio that aligns with long-term goals and risk tolerance is recommended.

Asset classes Info

  • Stocks
    99%
  • Cash
    0%
  • Other
    0%
  • Bonds
    0%
  • No data
    0%

The portfolio is heavily weighted towards stocks, comprising 99.47% of the total allocation. This indicates a high-risk, high-reward strategy, as equities tend to offer greater growth potential but also higher volatility. The minimal allocation to bonds and other asset classes suggests limited exposure to less volatile investments that could provide downside protection. For a more balanced risk profile, consider integrating additional asset classes, such as bonds or real estate, to cushion against market swings and provide more consistent returns over time.

Sectors Info

  • Technology
    25%
  • Financials
    14%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Real Estate
    4%
  • Utilities
    3%

Sector allocation in the portfolio shows a strong emphasis on technology, making up nearly 25% of the total. Other significant sectors include financial services, industrials, and consumer cyclicals. This sector distribution suggests a focus on growth-oriented industries, which can drive substantial returns but also expose the portfolio to sector-specific risks. For a more resilient portfolio, ensure a well-rounded sector allocation by considering sectors that may perform well in different economic conditions, thereby reducing the impact of sector-specific downturns.

Regions Info

  • North America
    73%
  • Europe Developed
    12%
  • Japan
    5%
  • Asia Emerging
    3%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    0%
  • Europe Emerging
    0%

Geographically, the portfolio is predominantly focused on North America, with 73.35% of assets allocated to this region. This concentration suggests a reliance on the US market's performance, which could result in regional risk exposure. While there is some diversification with allocations in Europe, Japan, and other regions, the overall global exposure is limited. To mitigate regional risks and capture growth opportunities in other markets, consider increasing allocations to underrepresented regions, thereby enhancing geographic diversification and reducing dependency on the US economy.

Redundant positions Info

  • Vanguard Total International Stock Index Fund ETF Shares
    Schwab International Small-Cap Equity ETF
    High correlation
  • Vanguard Small-Cap Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio exhibits high correlations among certain assets, particularly between the Vanguard Total International Stock Index Fund ETF Shares and the Schwab International Small-Cap Equity ETF, as well as between the Vanguard Small-Cap Index Fund ETF Shares and the Vanguard S&P 500 ETF. This correlation indicates that these assets tend to move in the same direction, which could limit diversification benefits. To enhance diversification, consider incorporating assets with lower correlations, which can help reduce portfolio volatility and improve risk-adjusted returns over time.

Dividends Info

  • Schwab International Small-Cap Equity ETF 2.70%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.72%

With a total dividend yield of 1.72%, the portfolio provides a modest income stream. The highest yield comes from the Vanguard Total International Stock Index Fund ETF Shares at 3.0%, while other ETFs contribute lower yields. This indicates a focus on growth over income, which may be suitable for investors seeking capital appreciation rather than regular income. To boost income potential, consider incorporating higher-yielding investments, such as dividend-focused ETFs or bonds, which can provide a more consistent income stream while maintaining growth prospects.

Ongoing product costs Info

  • Schwab International Small-Cap Equity ETF 0.11%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, suggesting a cost-efficient investment strategy. This low TER is beneficial as it minimizes the drag on returns, allowing more of the portfolio's gains to be realized by the investor. Keeping costs low is an essential aspect of optimizing long-term returns. To maintain this cost-efficiency, continue to focus on low-cost ETFs and avoid high-fee investment products that could erode potential gains. Regularly reviewing and managing investment costs is crucial for maximizing portfolio performance.

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.

Portfolio optimization suggests that the current allocation may not be on the efficient frontier due to high asset correlations. The efficient frontier represents the set of optimal portfolios offering the highest expected return for a defined level of risk. By reducing correlations and enhancing diversification, the portfolio could potentially achieve a more optimal risk-return balance. However, given the existing overlap, significant changes might be unnecessary. Instead, focus on maintaining alignment with investment goals and risk tolerance, ensuring the portfolio remains well-suited to long-term objectives.

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