A balanced portfolio with strong US focus and broad global diversification

Report created on Dec 6, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

This portfolio is composed of two main ETFs: the Vanguard S&P 500 ETF, which makes up 70% of the portfolio, and the Vanguard Total International Stock Index Fund ETF Shares, accounting for the remaining 30%. The portfolio is heavily weighted towards equities, with a minor allocation to cash and other assets. This composition indicates a focus on growth through major global equities, primarily in the US. Such a structure is relevant because it offers broad market exposure with simplicity, but may lack the depth of diversification found in portfolios with a wider range of asset types. Consider evaluating whether this allocation aligns with your growth expectations and risk tolerance.

Growth Info

The portfolio's historical performance has been impressive, with a compound annual growth rate (CAGR) of 11.98%. However, it also experienced a maximum drawdown of -33.87%, reflecting potential volatility. These figures highlight the portfolio's ability to deliver strong returns over time, but also underscore the risks involved. While past performance is not indicative of future results, understanding these trends helps in setting realistic expectations. To manage potential downturns, consider strategies such as diversifying further or incorporating assets with lower volatility.

Projection Info

Monte Carlo simulations provide a statistical approach to forecasting potential portfolio outcomes by using historical data to generate numerous possible future scenarios. This portfolio's simulations, with an annualized return of 10.94%, suggest a range of outcomes, with the 5th percentile at 19.74% and the 67th percentile at 387.02%. While these projections offer insights into potential returns, they are based on historical performance and assumptions that may not hold in the future. Regularly reviewing these projections can help you stay informed about potential risks and opportunities.

Asset classes Info

  • Stocks
    99%

The portfolio is predominantly invested in stocks, with 99.49% allocated to equities. This high concentration in a single asset class suggests a focus on capital appreciation, but it also increases exposure to market volatility. Diversification across asset classes can reduce risk and enhance returns over time. Consider incorporating bonds or other asset types to mitigate risk and provide stability, especially during market downturns. A more balanced asset allocation could improve the portfolio's resilience against market fluctuations.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation in this portfolio is diverse, with a notable concentration in technology (27.01%), followed by financial services (15.22%) and healthcare (10.59%). This distribution reflects a focus on sectors with strong growth potential. However, such concentration can expose the portfolio to sector-specific risks. It's important to regularly assess whether the current sector allocation aligns with your risk tolerance and economic outlook. Diversifying further across sectors may help balance potential risks and rewards.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio has a strong geographic focus on North America, which accounts for 71.92% of the allocation. It also includes exposure to Europe, Asia, and other regions, providing some level of international diversification. This geographic distribution can help mitigate risks associated with economic downturns in any single region. However, the heavy North American weighting may limit exposure to growth opportunities in emerging markets. Consider evaluating whether increasing international diversification aligns with your 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 can potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. This approach focuses on maximizing returns for a given level of risk by adjusting the allocation between existing assets. While this optimization can improve efficiency, it doesn't necessarily enhance diversification or other investment goals. Regularly reviewing and rebalancing the portfolio can help maintain optimal efficiency and align with your evolving risk tolerance and objectives.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.71%

The portfolio has a total dividend yield of 1.71%, with the Vanguard S&P 500 ETF yielding 1.2% and the Vanguard Total International Stock Index Fund ETF Shares yielding 2.9%. Dividends can provide a steady income stream and contribute to total returns. However, the relatively low yield suggests a focus on capital growth rather than income generation. If income is a priority, consider incorporating higher-yielding assets or dividend-focused funds to enhance cash flow without sacrificing growth potential.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.04%. This cost efficiency is crucial for long-term investment success, as high fees can significantly erode returns over time. Keeping expenses low allows more of your investment to compound and grow. Regularly reviewing and comparing costs with other investment options can help ensure that your portfolio remains cost-effective. Consider whether any changes in asset allocation might impact overall costs and weigh these against potential benefits.

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