Balanced portfolio with strong US focus and low-cost Vanguard ETFs

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 80% in the Vanguard Total Stock Market Index Fund ETF. Bonds make up 10% and international stocks another 10%. This composition leans towards growth, typical for a balanced profile, which often includes a mix of stocks and bonds. The allocation is well-aligned with a moderate risk tolerance, offering potential for growth while maintaining some stability through bond exposure. Consider enhancing diversification by exploring other asset classes or slightly increasing international exposure to balance the US focus.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 11.77%, indicating robust performance over time. However, a maximum drawdown of -32.57% suggests vulnerability during market downturns. Comparing this to benchmarks, the portfolio performs well, but the drawdown highlights the importance of risk management. To mitigate future risks, consider strategies like rebalancing or diversifying further. Remember, past performance is not a guarantee of future results, so staying informed and adaptable is key.

Projection Info

The Monte Carlo simulation, which uses historical data to predict possible future outcomes, shows a wide range of potential returns. With a median return of 137.74% and 950 simulations showing positive returns, the outlook is generally optimistic. This suggests the portfolio is likely to grow, although the 5th percentile projection of 1.67% reminds us of potential downturns. Such simulations help in understanding risk but are not foolproof. Regularly review your portfolio to adjust for changing market conditions and personal goals.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%
  • Cash
    1%

The portfolio is predominantly stock-focused, with nearly 90% in equities and just under 10% in bonds. This reflects a growth-oriented strategy but may lack the diversification seen in portfolios with more varied asset classes. Compared to a typical balanced benchmark, which might have a higher bond allocation, this portfolio leans more towards equities. To enhance diversification, consider incorporating other asset classes like real estate or commodities, which can provide different risk-return profiles and potentially smooth portfolio volatility.

Sectors Info

  • Technology
    26%
  • Financials
    13%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Utilities
    2%

The sector allocation is technology-heavy at 25.93%, followed by financial services and healthcare. This mirrors common market indices but suggests a concentration risk, particularly if tech faces regulatory challenges or market corrections. Diversifying across more sectors can reduce this risk and provide stability. It's worth considering adjustments if certain sectors are expected to underperform. Maintaining a balanced sector distribution can help navigate economic cycles more effectively and reduce reliance on any single sector.

Regions Info

  • North America
    80%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

With over 80% of assets in North America, the portfolio is highly concentrated geographically. This offers strong exposure to the US market but limits diversification benefits from other regions. Compared to global benchmarks, which often have more international exposure, this portfolio may miss out on growth opportunities in emerging markets. Consider shifting a portion of investments to increase geographic diversity, which can enhance returns and reduce risk by capturing growth in different economic environments.

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 identifies the best possible risk-return ratio based on the current assets. This involves adjusting the allocation between stocks and bonds to achieve a more efficient balance. While the current allocation is suitable for a balanced profile, exploring optimization can reveal opportunities for improved returns or reduced risk. Keep in mind that efficiency focuses on risk-return trade-offs and may not address diversification needs or personal investment goals.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.75%

The portfolio offers a modest total dividend yield of 1.75%, with the bond ETF contributing the highest yield at 3.7%. Dividends can provide a steady income stream, which is beneficial for reinvestment or generating cash flow. For investors seeking income, consider increasing dividend-paying assets. While the current yield aligns with a growth-focused strategy, balancing growth and income through dividends can offer additional financial flexibility and resilience during market fluctuations.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • 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 impressively low at 0.04%, thanks to the cost-efficient Vanguard ETFs. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode gains over time. This cost structure is well-aligned with best practices in investment management. Continue to monitor costs and explore opportunities to reduce them further, such as switching to lower-cost alternatives if available. Maintaining low fees supports better net returns and enhances overall portfolio performance.

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