A balanced US-focused portfolio with a strong emphasis on international diversification

Report created on Dec 23, 2024

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 of two main ETFs: Vanguard Total International Stock Index Fund ETF Shares and Vanguard S&P 500 ETF, with a weighting of 60% and 40%, respectively. This setup reflects a balanced approach, focusing on both international and domestic equities. Compared to common benchmarks, this allocation leans slightly more towards international exposure, providing a broader diversification. This composition is advantageous for investors seeking to mitigate country-specific risks and capitalize on global growth opportunities. Consider maintaining this balance to continue benefiting from both international and US market dynamics.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 9.32%, which is commendable. This rate indicates a solid growth trajectory, akin to a steady car journey over a long road trip. The maximum drawdown of -33.89% signifies the most significant drop in value, a crucial measure for understanding potential risks. Compared to typical market indices, these figures suggest a resilient performance. However, remember that past performance does not guarantee future results. Regularly review historical data to ensure the portfolio continues to align with your risk tolerance and investment goals.

Projection Info

The forward projection, using Monte Carlo simulations, indicates a potential range of outcomes for the portfolio. This method uses historical data to simulate 1,000 possible future scenarios. The median (50th percentile) suggests a potential growth of 248.32%, while the 5th percentile shows a more conservative 20.27% increase. These projections highlight the portfolio's capacity for growth while acknowledging inherent uncertainties. While useful, remember that simulations are not predictions and should be used as one of many tools in decision-making. Regularly revisit these projections to stay informed about potential future performance.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 98.76% of the assets, with minimal cash and other assets. This strong equity focus aligns with a growth-oriented strategy, potentially offering higher returns over the long term. However, it also increases exposure to market volatility. Compared to typical balanced portfolios, which might include more bonds or alternative assets, this allocation is more aggressive. Consider diversifying into other asset classes like bonds or real estate to reduce risk and enhance stability, especially if market conditions become turbulent.

Sectors Info

  • Technology
    21%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    3%

The sector allocation is well-distributed, with technology, financial services, and industrials being the most prominent. This distribution closely aligns with common benchmarks, indicating a diversified exposure across various industries. Such diversification can help mitigate sector-specific risks, although it may also mean exposure to industry-wide downturns. For instance, a tech-heavy portfolio might face higher volatility during interest rate hikes. Continue monitoring sector trends and adjust allocations as necessary to maintain a balanced risk profile and capitalize on emerging opportunities.

Regions Info

  • North America
    45%
  • Europe Developed
    23%
  • Asia Emerging
    10%
  • Japan
    9%
  • Asia Developed
    6%
  • Australasia
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio has a strong North American presence at 44.58%, with significant allocations in Europe, Asia, and other regions. This global exposure enhances diversification and reduces reliance on any single market. Compared to common benchmarks, the portfolio is well-diversified geographically, offering a buffer against regional economic fluctuations. However, it may be underexposed to emerging markets, which could offer higher growth potential. Consider increasing exposure to these regions to capture potential upside, while also being mindful of the associated risks.

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's current allocation could be optimized using the Efficient Frontier concept to achieve a better risk-return balance. This involves adjusting the weights of the existing assets to find the combination that offers the highest expected return for a given level of risk. While this optimization focuses solely on the current assets, it can help improve efficiency without necessarily increasing diversification. Consider periodically reviewing and rebalancing the portfolio to ensure it remains on the Efficient Frontier, maximizing returns while maintaining acceptable risk levels.

Dividends Info

  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.32%

The portfolio's dividend yield stands at 1.32%, with contributions from both ETFs. While dividends are not the primary focus, they provide a steady income stream that can enhance total returns, especially during periods of market volatility. This yield is relatively modest compared to income-focused portfolios but aligns with the portfolio's growth-oriented strategy. For those seeking more income, consider increasing allocations to higher-yielding assets, keeping in mind the potential trade-off with growth. Regularly review dividend policies to ensure they align with your income needs and investment goals.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of 0.06%. This low cost structure supports better long-term performance by minimizing fee-related drag on returns. Compared to industry averages, these costs are exceptionally competitive, allowing more of your investment to work for you. Keeping costs low is a crucial aspect of successful investing. Continue to monitor expense ratios and explore opportunities to reduce costs further, such as switching to even lower-cost funds if available, to maximize your investment's potential.

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