A balanced portfolio with a strong focus on US equities and moderate bond exposure

Report created on Dec 13, 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 five major ETFs, with a notable 40% allocation to the Vanguard S&P 500 ETF, focusing on large-cap US equities. The Vanguard Total Bond Market Index Fund ETF represents 30% of the portfolio, providing fixed-income stability. Additionally, there is a 15% allocation to international stocks through the Vanguard Total International Stock Index Fund ETF, while small-cap value exposure is achieved through Avantis ETFs, comprising 15% collectively. This composition reflects a balanced strategy aiming for growth with a measure of stability through bonds.

Growth Info

Historically, the portfolio has shown a Compound Annual Growth Rate (CAGR) of 10.73%, indicating robust growth over time. However, it has also experienced a maximum drawdown of 26.2%, highlighting potential volatility. This performance suggests a capacity for strong returns, albeit with periods of significant downturns. Understanding historical performance is crucial, as it provides a benchmark against which future performance can be measured, albeit past performance does not guarantee future results. Investors should be prepared for potential fluctuations and consider their risk tolerance when evaluating such historical data.

Projection Info

The forward projection, using Monte Carlo analysis with 1,000 simulations, offers a range of potential future outcomes for the portfolio. This method uses historical data to simulate various market conditions, providing insights into potential returns. The analysis suggests an annualized return of 11.57%, with 960 simulations showing positive returns. However, it is essential to recognize that these are probabilistic outcomes, not certainties. Investors should use these projections as a guide, understanding that actual future performance may vary due to unforeseen market conditions.

Asset classes Info

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

The portfolio's asset allocation is predominantly in stocks at approximately 69.7%, with bonds making up about 29.7%. This allocation provides a balance between growth potential and income stability. Stocks typically offer higher returns but come with increased volatility, while bonds provide steadier income and lower risk. The small allocation to cash and other assets suggests limited liquidity, which could be a consideration in times of market stress. Investors should evaluate whether this asset class distribution aligns with their risk tolerance and investment objectives.

Sectors Info

  • Technology
    16%
  • Financials
    12%
  • Industrials
    8%
  • Consumer Discretionary
    8%
  • Health Care
    6%
  • Telecommunications
    5%
  • Energy
    4%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sectoral allocation is diversified, with the largest exposure in technology at nearly 16%, followed by financial services and industrials. This spread across multiple sectors helps mitigate sector-specific risks, as poor performance in one area may be offset by gains in another. However, the concentration in technology could pose a risk if this sector experiences downturns. Investors should periodically review sector allocations to ensure they remain in line with market trends and personal investment strategies, considering potential rebalancing to maintain diversification.

Regions Info

  • North America
    51%
  • Europe Developed
    8%
  • Japan
    4%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic exposure is heavily weighted towards North America at over 51%, with limited allocations to Europe, Japan, and emerging markets. This concentration reflects a strong reliance on the US economy, which can be both a strength and a risk, depending on economic conditions. While this may benefit from US market growth, it also exposes the portfolio to region-specific risks. Investors may consider increasing exposure to other regions to enhance diversification and reduce dependency on North American markets.

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.

Portfolio optimization using the Efficient Frontier suggests that the current allocation may not be fully optimized for the best risk-return ratio. Adjustments in asset weightings could potentially enhance efficiency, balancing risk and return more effectively. This does not necessarily mean altering the asset mix but rather refining the distribution among existing assets. Investors should explore optimization strategies to ensure they are achieving the best possible outcomes, keeping in mind that efficiency focuses on the risk-return trade-off rather than diversification.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.00%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.31%

The portfolio's overall dividend yield is 2.31%, with contributions from various ETFs like the Vanguard Total Bond Market Index Fund ETF and Avantis International Small Cap Value ETF. Dividends can provide a steady income stream, particularly valuable during periods of market volatility. However, the yield may not be sufficient for those seeking significant income from their investments. Investors should assess whether the current yield aligns with their income needs and consider reinvesting dividends to enhance long-term growth.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, reflecting a cost-effective investment strategy. Lower costs are beneficial as they enhance net returns, particularly over the long term. The Avantis ETFs have higher expense ratios compared to the Vanguard options, which may impact overall costs. Investors should regularly review expense ratios to ensure they are not eroding returns and consider lower-cost alternatives if necessary, while also weighing the benefits of potential higher returns from more expensive funds.

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