A balanced portfolio with broad diversification and a focus on global equity markets

Report created on Dec 17, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed of two major ETFs, each making up 50% of the total allocation. The Vanguard Total Stock Market Index Fund ETF covers the U.S. market, while the Vanguard Total International Stock Index Fund ETF provides exposure to international markets. This structure offers a broad market exposure, balancing between domestic and international equities. The composition is heavily weighted towards stocks, with negligible allocations in cash and other asset classes. This setup is typical for investors seeking long-term growth through equity investments. To enhance diversification, consider adding other asset classes such as bonds or real estate to reduce volatility and provide more stability during market downturns.

Growth Info

Historically, this portfolio has shown a compound annual growth rate (CAGR) of 10.18%, which is a strong performance metric. It has experienced a maximum drawdown of -34.41%, indicating significant vulnerability during market downturns. The fact that 90% of returns were generated in just 25 days highlights the importance of staying invested to capture these gains. Historical performance can provide insights into potential future returns, but it is not a guarantee. It's crucial to remain aware of market conditions and be prepared for potential volatility. Regularly reviewing and adjusting the portfolio in response to market changes can help manage risks and sustain growth.

Projection Info

Forward projections using Monte Carlo simulations indicate a wide range of potential outcomes. With 1,000 simulations, the portfolio's 5th percentile outcome is a 22.02% return, while the 50th percentile is 246.79%, and the 67th percentile is 355.39%. These projections use historical data to simulate future scenarios, providing a probabilistic view of potential returns. However, they do not account for unforeseen market events or changes in economic conditions. It's important to use these projections as a guide rather than a prediction. Consider diversifying further or adjusting allocations to improve the likelihood of achieving desired outcomes under various market conditions.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly allocated to stocks, with 99.14% in equities. This high concentration in a single asset class suggests a focus on growth but also increases vulnerability to market volatility. While equities generally offer higher long-term returns, they also come with higher risk. Diversification across different asset classes, such as bonds or commodities, can help mitigate this risk. Adding bonds, for instance, could provide more stability and income, especially during market downturns. A more diversified asset allocation can help smooth out returns and reduce the impact of market fluctuations on the overall portfolio.

Sectors Info

  • Technology
    22%
  • Financials
    17%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation in this portfolio is well-distributed, with significant exposure to technology, financial services, and industrials. These three sectors alone make up over 50% of the portfolio, indicating a strong bias towards growth-oriented industries. While this can drive returns during economic expansions, it also exposes the portfolio to sector-specific risks. To reduce this risk, consider rebalancing to achieve a more even distribution across sectors. Including defensive sectors such as utilities or consumer defensives can provide stability during economic downturns, as these sectors tend to be less sensitive to economic cycles.

Regions Info

  • North America
    54%
  • Europe Developed
    19%
  • Asia Emerging
    8%
  • Japan
    8%
  • Asia Developed
    5%
  • Australasia
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, with 53.66% of assets allocated there. This provides strong exposure to the U.S. market, known for its stability and growth potential. However, the portfolio also includes significant allocations to Europe and Asia, offering some diversification across regions. Emerging markets have a smaller representation, which could limit growth opportunities. Increasing exposure to emerging markets may enhance diversification and capture potential high-growth opportunities. While geographic diversification can help manage risks associated with regional economic downturns, it's important to consider political and currency risks as well.

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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. Currently, the allocation is heavily skewed towards equities, which may not be the most efficient use of risk. By adjusting the weights of existing assets, the portfolio could move closer to the Efficient Frontier, potentially improving returns for the same level of risk or reducing risk for the same level of returns. This process involves analyzing the expected returns, volatility, and correlation of assets to identify the optimal mix. Regularly reassessing and rebalancing the portfolio can help maintain efficiency.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.10%

The portfolio's dividend yield stands at 2.1%, with the Vanguard Total Stock Market Index Fund ETF yielding 1.2% and the Vanguard Total International Stock Index Fund ETF yielding 3.0%. Dividends provide a steady income stream and can contribute significantly to total returns, especially in low-growth environments. Reinvesting dividends can enhance compounding, leading to greater long-term growth. While the current yield is moderate, seeking higher-yielding investments could increase income. However, it's essential to balance yield with the risk of potential capital loss. Evaluating the sustainability of dividend payments is crucial to ensure reliable income over time.

Ongoing product costs Info

  • 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) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, which is relatively low and beneficial for long-term growth. Lower costs mean more of the investment returns are retained, compounding over time. Vanguard is known for its low-cost offerings, which is a strength of this portfolio. While the current costs are minimal, it's always worth reviewing for any changes or opportunities to reduce expenses further. Consider comparing with other low-cost providers or direct indexing options to potentially decrease costs. Keeping costs low is a key factor in maximizing net returns and achieving financial goals over the long term.

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