Balanced growth-focused portfolio with strong US bias and moderate international exposure

Report created on Dec 25, 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 heavily weighted towards the Vanguard S&P 500 ETF, making up 70% of the total allocation. It includes a mix of other ETFs with international and growth focuses. A balanced portfolio typically has a mix of stocks and bonds, but this is heavily equity-focused. This composition can lead to higher growth potential but also increased volatility. Consider diversifying by incorporating other asset classes, like bonds, to reduce risk and stabilize returns over time.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 13.03%. However, it experienced a significant maximum drawdown of -34.03%, indicating vulnerability during market downturns. This performance surpasses many benchmarks, but past success doesn't ensure future gains. It’s crucial to be aware of potential risks and to prepare for similar downturns by maintaining a diversified strategy and possibly increasing cash reserves.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns. The median projection shows a substantial gain, but there is a small chance of underperformance. While these simulations offer insights, they rely on historical data, which might not reflect future market conditions. It's wise to use these projections as one of many tools in decision-making and to remain flexible in adjusting the strategy as market conditions change.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with negligible allocations to cash and other assets. This lack of diversification across asset classes can lead to higher volatility. Stocks typically offer higher returns over the long term, but they also come with greater risk. Consider adding fixed-income securities to provide stability and reduce overall risk, especially during periods of market turbulence.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is tech-heavy, with technology stocks comprising over 30% of the portfolio. Other significant sectors include financial services and consumer cyclicals. While this composition aligns with many benchmarks, it could lead to increased volatility, especially if interest rates rise or tech stocks underperform. To mitigate risk, consider diversifying into underrepresented sectors, which may offer stability during tech sector downturns.

Regions Info

  • North America
    86%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio is predominantly focused on North America, with limited exposure to other regions. While this aligns with many US-based investors, it limits potential benefits from global diversification. Expanding geographic exposure can reduce risk and increase opportunities for growth in emerging markets. Consider reallocating a portion of the portfolio to international markets to capture global economic trends.

Redundant positions Info

  • Vanguard Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Growth Index Fund ETF Shares and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, limiting diversification benefits. To improve diversification, consider replacing one of these with an asset that has a lower correlation, potentially reducing portfolio volatility and enhancing returns during market downturns.

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.

This portfolio could benefit from optimization using the Efficient Frontier concept, which seeks the best risk-return balance. By adjusting the current asset allocation, you might achieve a more efficient portfolio. However, optimization should consider your risk tolerance and investment goals, as it focuses solely on maximizing returns for a given level of risk, not necessarily achieving diversification or other objectives.

Dividends Info

  • Vanguard Small-Cap Index Fund ETF Shares 0.90%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Growth Index Fund ETF Shares 0.30%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 0.94%

The portfolio's dividend yield is modest at 0.94%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield. Dividends provide a steady income stream and can be reinvested for growth. However, the focus on growth-oriented ETFs means the yield is lower than income-focused portfolios. If income is a priority, consider increasing exposure to higher-yielding assets.

Ongoing product costs Info

  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, which is beneficial for long-term performance. Lower costs mean more of your investment returns stay in your pocket. This cost efficiency aligns well with best practices and contributes positively to the portfolio’s overall return. Maintaining low costs should remain a priority to maximize net returns.

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