Balanced Portfolio with High Diversification and Low Costs Offers Moderate Risk and Solid Growth Potential

Report created on Nov 25, 2024

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 composed of three Vanguard ETFs: Total Stock Market (60%), Total International Stock (30%), and Total Bond Market (10%). The allocation reflects a balanced approach with a strong emphasis on equities, providing exposure to both domestic and international markets. The bond component, albeit smaller, adds a layer of stability. Such a composition is highly diversified, which is beneficial for spreading risk across different asset classes and geographies. Maintaining this balance can help achieve steady growth while mitigating potential losses during market downturns.

Growth Info

Historically, this portfolio has shown a robust performance with a compound annual growth rate (CAGR) of 10.2%. This indicates that a hypothetical initial investment has grown significantly over time, showcasing the portfolio's ability to generate returns. However, it's important to note the maximum drawdown of -32.1%, reflecting periods of substantial decline. While the portfolio has rebounded, understanding these fluctuations is crucial for setting realistic expectations. The concentration of returns in just 28 days emphasizes the importance of staying invested to capture these gains.

Projection Info

Utilizing a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method models potential outcomes by simulating random variables to assess risk and uncertainty. Assuming a hypothetical initial investment, the results show a median growth of 138.83%. While the 5th percentile indicates a potential loss of -9.51%, the 67th percentile suggests a promising increase of 206.6%. With 925 simulations yielding positive returns, the annualized return stands at 7.13%, highlighting the portfolio's growth potential amidst market volatility.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio is primarily composed of stocks, accounting for 89.42%, with bonds making up 9.89%. This allocation leans towards equities, offering higher growth potential but also increased volatility. Bonds provide a cushion against market swings, enhancing stability. The small cash and other allocations are negligible. This mix suits investors seeking growth with a moderate risk appetite. To optimize, consider periodically reviewing the balance to ensure it aligns with changing financial goals and risk tolerance, especially as market conditions evolve.

Sectors Info

  • Technology
    22%
  • Financials
    14%
  • Industrials
    10%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation within the portfolio is diverse, with a significant focus on Technology (22.36%), Financial Services (14.24%), and Industrials (9.86%). This spread across various sectors mitigates risk and capitalizes on different economic cycles. Technology's prominence reflects its growth potential, while Financial Services and Industrials add stability. Although less represented, sectors like Utilities and Real Estate provide defensive characteristics. Regularly reviewing sector exposure ensures alignment with market trends and personal investment objectives. Diversification across sectors can help navigate economic shifts effectively.

Regions Info

  • North America
    62%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America (62.05%), with Europe Developed (11.80%) and Asia Emerging (4.93%) also represented. This allocation provides a strong base in a stable, developed market while capturing growth opportunities in emerging regions. The exposure to diverse geographies reduces risk associated with any single market's downturn. Although the portfolio is well-diversified, periodically assessing geographic allocations can optimize performance, especially in response to global economic changes. Balancing developed and emerging markets can enhance long-term growth prospects.

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 optimization potential lies in its balance along the efficient frontier, offering both growth and stability. To achieve a riskier profile, consider increasing the equity component, while a more conservative approach would involve boosting bond allocations. Before optimizing, ensure the portfolio aligns with personal risk tolerance and financial goals. Once these are clear, adjustments can be made to enhance performance. Regular reviews and strategic rebalancing are key to maintaining an optimal portfolio that meets evolving needs and market conditions.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.04%

With a total yield of 2.04%, the portfolio generates moderate income through dividends. The Vanguard Total Bond Market ETF offers the highest yield at 3.6%, providing steady income and stability. The international stock ETF follows with a yield of 3.0%, while the domestic stock ETF yields 1.3%. This blend of income sources supports a balanced approach, combining growth potential with regular cash flow. Investors seeking income alongside capital appreciation should consider maintaining or slightly increasing the bond allocation to enhance yield without sacrificing growth.

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 boasts impressively low costs with a total expense ratio (TER) of 0.04%. This cost efficiency is crucial for maximizing net returns, as lower fees mean more money remains invested to compound over time. Each ETF in the portfolio has a minimal expense ratio, with the bond and domestic stock ETFs at 0.03% and the international stock ETF at 0.08%. Keeping costs low is a smart strategy, especially for long-term investors. Regularly reviewing and minimizing fees can significantly impact overall portfolio performance.

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