A cautious and diversified portfolio with a strong focus on domestic equities and bonds

Report created on Jan 12, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three main ETFs, with a significant 55% allocation to the Vanguard Total Stock Market Index Fund ETF, 30% in the Vanguard Total Bond Market Index Fund ETF, and 15% in the Vanguard Total International Stock Index Fund ETF. This distribution leans towards equities, yet maintains a substantial bond allocation, aligning with a cautious risk profile. This composition offers broad market exposure, balancing growth potential with stability from bonds. Consider maintaining this balance to support steady growth while managing risk.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 8.84%, with a maximum drawdown of -27.3%. This indicates decent growth over time, albeit with notable volatility. Compared to benchmarks, this performance is fairly robust for a cautious portfolio. The concentrated days of returns suggest market timing can significantly impact results. To mitigate this, consider maintaining a long-term perspective and avoiding frequent adjustments based on short-term market movements.

Projection Info

Monte Carlo simulations, which use historical data to forecast potential outcomes, show a median (50th percentile) portfolio growth of 142.18% and an annualized return of 7.45%. While simulations indicate a positive outlook, with 938 out of 1,000 simulations yielding positive returns, it's crucial to remember that past data doesn't guarantee future results. This forward-looking analysis underscores the importance of a diversified strategy to navigate market uncertainties.

Asset classes Info

  • Stocks
    70%
  • Bonds
    30%
  • Cash
    1%

The portfolio's allocation is primarily in stocks (69.58%) and bonds (29.55%), with minimal cash and other assets. This split mirrors typical balanced portfolios, promoting diversification across asset classes. Such a structure is beneficial for managing risk, as bonds often counterbalance stock volatility. To enhance diversification, consider periodically reviewing the bond-equity ratio to ensure it aligns with changing market conditions and personal risk tolerance.

Sectors Info

  • Technology
    19%
  • Financials
    11%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Industrials
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

Sector-wise, the portfolio has a notable tilt towards technology (18.90%), followed by financial services and healthcare. This distribution aligns with common benchmarks, offering broad sector exposure. A tech-heavy allocation can lead to higher volatility, especially during interest rate changes. To mitigate sector-specific risks, consider occasionally rebalancing to maintain a well-rounded sectoral exposure, ensuring alignment with both market trends and personal investment goals.

Regions Info

  • North America
    56%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America (55.94%), with limited exposure to other regions. This concentration can limit diversification benefits, especially if regional markets underperform. While this aligns with the investor's home bias, consider increasing exposure to international markets to capture global growth opportunities and reduce dependence on any single economy. This may enhance the portfolio's resilience against regional 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 seeks the best possible risk-return ratio. This involves adjusting the weights of existing assets to achieve the highest expected return for a given level of risk, without adding new assets. Consider periodically reviewing and rebalancing the portfolio to ensure it remains on the Efficient Frontier, thus maximizing the potential return for the risk taken.

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) 2.34%

The portfolio's dividend yield stands at 2.34%, with contributions from all three ETFs, notably the bond fund at 3.7%. Dividends provide a steady income stream, which can be particularly appealing in a cautious portfolio. They also offer a buffer during market downturns. Consider reinvesting dividends to compound growth over time, or using them as income, depending on your financial goals. Regularly review dividend policies to ensure they align with your investment strategy.

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 benefits from impressively low costs, with a total expense ratio (TER) of 0.04%, thanks to the selection of low-cost Vanguard ETFs. Minimizing fees is crucial for maximizing long-term returns, as high costs can erode gains over time. This cost efficiency supports the portfolio's overall performance. Continue monitoring expense ratios and explore opportunities to reduce costs further, such as by switching to lower-cost funds if available.

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