A balanced portfolio with strong diversification and a focus on developed markets

Report created on Mar 18, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed predominantly of ETFs, with 80% in stocks, 10% in bonds, and the remainder in real estate and other assets. This allocation is typical for a balanced portfolio, offering a mix of growth potential and income. Compared to benchmarks, this structure leans towards equities, which can enhance growth but also increase volatility. To align with balanced portfolio standards, consider maintaining or slightly increasing bond exposure to cushion against market downturns. Overall, the portfolio's structure is well-balanced, providing a solid foundation for diversified growth.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 9.6%, which is impressive for a balanced portfolio. This performance, however, came with a maximum drawdown of -31.82%, indicating significant volatility during downturns. Comparing this to benchmarks, the returns are competitive, but the risk level is higher than some might expect for a balanced profile. It's crucial to acknowledge that past performance doesn't guarantee future results. To mitigate potential future risks, consider strategies to reduce drawdowns, such as diversifying further into less correlated assets or increasing bond allocations.

Projection Info

Monte Carlo simulations, which use historical data to predict potential future outcomes, suggest a median portfolio growth of 178.5%. This indicates a strong likelihood of positive returns, with 942 out of 1,000 simulations showing gains. However, the 5th percentile at -6.4% highlights potential downside risks. It's essential to remember that these projections are based on historical trends and cannot predict future market conditions with certainty. For future planning, consider regularly reviewing asset allocations and adjusting to maintain alignment with personal risk tolerance and market conditions.

Asset classes Info

  • Stocks
    80%
  • Bonds
    10%
  • Real Estate
    5%
  • Other
    3%
  • Cash
    2%

The portfolio's asset class distribution includes a significant 80% in stocks, complemented by bonds, real estate, and other assets. This allocation provides a good balance of growth and income potential. Compared to common benchmarks, the stock allocation is slightly higher, which can enhance growth but also increase volatility. To optimize diversification, consider reviewing the allocations to ensure they align with long-term goals and risk tolerance. A potential increase in bonds or other income-generating assets could provide additional stability during market fluctuations.

Sectors Info

  • Technology
    15%
  • Financials
    15%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Real Estate
    8%
  • Health Care
    7%
  • Consumer Staples
    6%
  • Telecommunications
    5%
  • Basic Materials
    4%
  • Utilities
    4%
  • Energy
    3%

The sector allocation is well-distributed, with notable concentrations in technology and financial services, each at 15%. This mirrors common benchmarks and suggests a balanced approach to sector exposure. However, tech-heavy portfolios may face higher volatility during interest rate hikes. To maintain sector balance, regularly review and adjust sector weights as needed to align with market trends and personal investment goals. This approach helps mitigate sector-specific risks and ensures the portfolio remains diversified across various economic conditions.

Regions Info

  • North America
    55%
  • Europe Developed
    20%
  • Asia Emerging
    6%
  • Asia Developed
    2%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America at 55%, with significant exposure to Europe Developed at 20%. This aligns with many benchmarks but may limit diversification benefits. While the current allocation provides stability, consider increasing exposure to emerging markets or underrepresented regions to enhance diversification and potentially capture higher growth rates. This geographic diversification can help mitigate risks associated with regional economic downturns and provide access to a broader range of growth opportunities.

Market capitalization Info

  • Mega-cap
    31%
  • Large-cap
    25%
  • Mid-cap
    20%
  • Small-cap
    7%
  • No data
    5%
  • Micro-cap
    1%

Market capitalization exposure is well-balanced, with significant allocations to mega and big caps at 31% and 25%, respectively. This distribution aligns with common benchmarks and provides stability through established companies. However, the smaller allocation to small and micro caps at 7% and 1% could limit growth potential. To enhance diversification, consider increasing exposure to smaller companies, which often offer higher growth prospects. This adjustment can provide a balanced mix of stability and growth, aligning with long-term investment goals.

Redundant positions Info

  • WisdomTree Europe Hedged Equity Fund
    Xtrackers MSCI Europe Hedged Equity ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the WisdomTree Europe Hedged Equity Fund and the Xtrackers MSCI Europe Hedged Equity ETF. Such correlations can limit diversification benefits, as these assets tend to move together during market shifts. To optimize risk management, consider reducing exposure to one of these ETFs or replacing it with a less correlated asset. This adjustment can enhance diversification and potentially improve the portfolio's resilience during market downturns, aligning with broader diversification 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 can be optimized using the Efficient Frontier, which helps achieve the best possible risk-return ratio based on current assets. This involves adjusting allocations to maximize returns for a given risk level. While the portfolio is already well-diversified, focusing on removing highly correlated assets can enhance efficiency. It's important to note that optimization doesn't guarantee diversification across all goals but focuses on balancing risk and return. Regularly reviewing and adjusting allocations can maintain alignment with personal risk tolerance and market conditions.

Dividends Info

  • Vanguard Total International Bond Index Fund ETF Shares 4.30%
  • Xtrackers MSCI Europe Hedged Equity ETF 0.10%
  • Invesco DB Precious Metals Fund 3.70%
  • Schwab Fundamental Emerging Markets Large Company Index ETF 4.40%
  • WisdomTree Europe Hedged Equity Fund 2.90%
  • iShares Cohen & Steers REIT ETF 1.80%
  • Invesco S&P 500® Low Volatility ETF 1.20%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.50%
  • Vanguard S&P 500 ETF 1.30%
  • Weighted yield (per year) 2.10%

The portfolio's dividend yield stands at 2.10%, providing a moderate income stream. This yield is beneficial for investors seeking regular income, particularly within a balanced portfolio. Dividend-paying assets can offer stability during market volatility, as they provide returns even when capital appreciation is limited. To optimize income, consider reviewing the dividend yield of individual holdings and balancing high-yield investments with growth-oriented assets. This approach ensures a steady income flow while maintaining growth potential, aligning with long-term investment objectives.

Ongoing product costs Info

  • Vanguard Total International Bond Index Fund ETF Shares 0.07%
  • Xtrackers MSCI Europe Hedged Equity ETF 0.46%
  • Invesco DB Precious Metals Fund 0.75%
  • Schwab Fundamental Emerging Markets Large Company Index ETF 0.39%
  • WisdomTree Europe Hedged Equity Fund 0.58%
  • iShares Cohen & Steers REIT ETF 0.33%
  • Invesco S&P 500® Low Volatility ETF 0.25%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.24%

The portfolio's total expense ratio (TER) is 0.24%, which is relatively low and supports better long-term returns by minimizing costs. This cost efficiency aligns with best practices and ensures more of the portfolio's returns are retained. However, individual ETF costs vary, with some higher than others. To further optimize costs, consider reviewing and potentially replacing higher-cost ETFs with similar, lower-cost alternatives. This strategy can enhance overall returns without compromising diversification or investment goals, ensuring efficient cost management.

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