A balanced portfolio with high diversification and a focus on retirement savings

Report created on Feb 11, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is primarily composed of the Vanguard Target Retirement 2035 Fund, making up 90% of the assets, with the remaining 10% in the Vanguard Total Stock Market Index Fund. This structure leans heavily on a single retirement-focused fund, offering a blend of stocks and bonds. While this provides a straightforward, hands-off approach, the heavy concentration in one fund might limit flexibility. A diversified fund like the Target Retirement 2035 typically adjusts its asset mix over time, aligning with a specific retirement date. It's essential to ensure this aligns with your retirement timeline and risk tolerance.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 6.82%, with a maximum drawdown of -33.39%. This indicates moderate growth with potential for significant declines during market downturns. Compared to benchmark indices, such performance is typical for balanced portfolios that aim for steady growth rather than aggressive gains. The historical performance underscores the importance of understanding that past performance does not guarantee future results. Monitoring the portfolio's performance against inflation and personal financial goals can help maintain its relevance.

Projection Info

Using Monte Carlo simulations, with 1,000 scenarios, the portfolio's potential future outcomes suggest a median (50th percentile) return of 249.5% by 2035. Such simulations rely on historical data to project possible future performance, highlighting that 984 out of 1,000 simulations resulted in positive returns. While these projections offer a sense of potential outcomes, it's crucial to remember that they are not predictions. External factors like market changes and economic shifts can significantly impact actual results. Regular reviews and adjustments ensure alignment with evolving financial goals.

Asset classes Info

  • Stocks
    70%
  • Bonds
    29%
  • Cash
    1%

The portfolio's asset allocation includes 70% stocks, 29% bonds, and 1% cash, aligning with a balanced investment strategy. This mix provides a moderate level of risk, suitable for investors seeking growth with some income stability. Compared to typical benchmarks, this allocation is well-balanced, offering potential for capital appreciation while mitigating volatility through bond exposure. Regularly reviewing the asset mix is advisable, especially as market conditions change or as you approach significant financial milestones, ensuring that the portfolio remains aligned with your risk tolerance and investment objectives.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio's sector allocation is led by technology at 26%, followed by financial services and consumer cyclical sectors. This distribution aligns closely with common market indices, indicating a broad market exposure. While tech-heavy allocations can drive growth, they may also introduce volatility, especially during periods of interest rate changes. Balancing sector exposure can help mitigate sector-specific risks and ensure a more stable performance across different economic cycles. Consider periodically reviewing sector weights to maintain diversification and reduce over-reliance on any single sector.

Regions Info

  • North America
    68%
  • Europe Developed
    13%
  • Asia Emerging
    6%
  • Japan
    5%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America at 68%, with smaller exposures to Europe, Asia, and other regions. This concentration on North American markets may limit exposure to international growth opportunities. While North American markets have historically provided strong returns, diversifying geographically can reduce region-specific risks and capitalize on global economic growth. Consider evaluating the potential benefits of increasing international exposure, particularly in emerging markets, to enhance diversification and potentially improve risk-adjusted returns.

Market capitalization Info

  • Mega-cap
    30%
  • Large-cap
    22%
  • Mid-cap
    13%
  • Small-cap
    4%
  • Micro-cap
    1%

The market capitalization breakdown shows a significant tilt towards mega and big-cap stocks, comprising 52% of the portfolio. This focus on larger companies often provides stability and lower volatility, as these companies typically have established market positions. However, it may limit exposure to the growth potential of smaller companies. Balancing market cap exposure could enhance diversification and capture growth opportunities across different company sizes. Consider assessing whether a more balanced approach across market caps aligns with your long-term investment 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's current asset allocation can be optimized using the Efficient Frontier, focusing on achieving the best possible risk-return ratio. The Efficient Frontier is a concept that identifies the optimal mix of assets to maximize returns for a given level of risk. While the portfolio is already well-diversified, slight adjustments in asset weights could further enhance its efficiency. Regularly reassessing the allocation against the Efficient Frontier can help ensure the portfolio remains aligned with your risk tolerance and return objectives.

Dividends Info

  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.20%
  • Weighted yield (per year) 0.12%

The dividend yield of the Vanguard Total Stock Market Index Fund stands at 1.20%, contributing modestly to the portfolio's overall return. Dividends provide a steady income stream, which can be particularly beneficial for reinvestment or income needs. While not the primary focus of this growth-oriented portfolio, dividend-paying stocks can offer stability during volatile market periods. Consider monitoring dividend yields and reinvestment strategies to enhance compounding effects and align with income objectives.

Ongoing product costs Info

  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • VANGUARD TARGET RETIREMENT 2035 FUND INVESTOR SHARES 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, reflecting Vanguard's reputation for cost-effective investing. Low costs are crucial for maximizing long-term returns, as they reduce the drag on performance. This efficient cost structure is a significant advantage, supporting better compounding of returns over time. Maintaining a focus on minimizing fees while ensuring the portfolio meets your investment needs is advisable. Regularly reviewing fund expenses can help ensure cost-effectiveness remains a priority.

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