A balanced portfolio with global diversification and low costs for moderate risk investors

Report created on Dec 15, 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 ETFs, each representing 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 global markets outside the U.S. This structure offers broad diversification across different regions and sectors. A balanced mix of domestic and international equities can help mitigate risks associated with economic downturns in specific regions. To further enhance diversification, consider incorporating other asset classes like bonds or real estate, which can provide stability during volatile market conditions.

Growth Info

Historically, this portfolio has delivered a compound annual growth rate (CAGR) of 10.24%, indicating strong performance over time. The maximum drawdown of -34.43% highlights the potential for significant losses during market downturns. Despite this, the portfolio's ability to recover and generate returns underscores its resilience. Understanding past performance helps set realistic expectations, but it's important to remember that historical data doesn't guarantee future results. To potentially reduce drawdowns, consider diversifying further with less correlated assets.

Projection Info

The Monte Carlo simulation, a method using historical data to project future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the portfolio's projected annualized return is 10.63%, with a 5th percentile outcome of 14.03% and a 67th percentile of 366.51%. While these projections offer insight into possible future scenarios, they are not predictions. Variability in market conditions and external factors can lead to different results. Regularly review your portfolio to ensure it aligns with your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.14% of assets in equities. This high concentration in a single asset class can lead to increased volatility, especially during market downturns. Diversifying across different asset classes, such as bonds or commodities, can help balance risk and improve overall portfolio stability. A more varied asset allocation can provide a cushion during turbulent market periods, potentially smoothing out returns over time.

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%

Sector allocation is well-distributed, with technology, financial services, and industrials taking the lead. This diversification across sectors reduces the risk of being overly exposed to any single industry. However, technology's significant share at 21.88% could still pose a risk if the sector experiences a downturn. Maintaining a balanced sector allocation can help mitigate these risks. Regularly reviewing and adjusting sector weights ensures alignment with market trends and personal investment goals.

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%

The portfolio's geographic allocation is predominantly in North America, with 53.66% exposure. This is complemented by substantial holdings in developed European and Asian markets. Such diversification helps spread risk across different economic regions, reducing vulnerability to local market fluctuations. However, emerging markets have limited representation, which could miss out on potential growth opportunities. Consider increasing exposure to emerging markets for a more balanced global allocation, keeping in mind the higher risk associated with these regions.

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.

Optimization using the Efficient Frontier suggests that this portfolio could potentially be adjusted for a better risk-return ratio. By reallocating existing assets, you can aim for the most efficient balance between risk and return, without necessarily adding new investments. This process involves evaluating the current asset mix and making strategic adjustments to improve efficiency. Regularly revisiting your portfolio's allocation can help maintain optimal performance in changing market conditions.

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%

With a total dividend yield of 2.1%, this portfolio provides a modest income stream from dividends. The Vanguard Total International Stock Index Fund ETF contributes a higher yield of 3.0%, enhancing the income potential. Dividends can be a valuable source of returns, especially during periods of market volatility. Reinvesting dividends can compound growth over time, while using them as income can provide cash flow. Consider your income needs and reinvestment strategy to maximize the benefits of dividend income.

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 a low 0.06%, reflecting the cost-efficiency of the selected ETFs. Low costs are crucial for maximizing investment returns, as high fees can erode gains over time. Vanguard's reputation for low-cost funds supports the portfolio's efficiency. Regularly reviewing and comparing fund fees can help ensure cost-effectiveness. Staying vigilant about costs allows you to retain more of your returns, contributing to long-term portfolio growth.

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