A cautious portfolio with a strong focus on retirement and excellent diversification

Report created on Jan 1, 2025

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is predominantly invested in the Vanguard Target Retirement 2055 Fund, making up 79.03% of the assets. This fund is complemented by the Vanguard Federal Money Market Fund, which constitutes 20.97% of the portfolio. This composition suggests a strong focus on long-term growth through the retirement fund, balanced by the stability of a money market fund. Compared to common benchmarks, this allocation is conservative, with a focus on capital preservation and gradual growth. To enhance growth potential, consider diversifying further into growth-oriented funds or equities, while maintaining a balance that aligns with your risk tolerance.

Growth Info

The portfolio has achieved a Compound Annual Growth Rate (CAGR) of 7.81%, indicating solid historical performance. This growth rate is commendable, especially for a cautious profile, as it reflects consistent returns over time. However, the portfolio also experienced a maximum drawdown of -26.67%, highlighting periods of significant loss. This underscores the importance of maintaining a diversified approach to mitigate such downturns. Comparing these metrics to benchmarks can provide additional context and insights into performance relative to market trends.

Projection Info

Forward projections using Monte Carlo simulations suggest an annualized return of 5.68%, with a 95% chance of positive returns. This method uses historical data to estimate future outcomes, but it's important to remember that past performance is not a guarantee of future results. The projections indicate a range of possible outcomes, with the 50th percentile showing a potential 105.12% portfolio value increase. To optimize potential returns, consider periodically reviewing and adjusting your asset allocation in response to changing market conditions and personal goals.

Asset classes Info

  • Stocks
    70%
  • Bonds
    8%
  • Cash
    1%

The portfolio's asset allocation includes 70.19% in stocks, 7.71% in bonds, and a small percentage in cash and other assets. This allocation aligns with a cautious investment strategy, providing a balance between growth and stability. Compared to typical benchmarks, the stock allocation is relatively high for a cautious profile, suggesting a willingness to accept some risk for potential growth. To enhance diversification, consider increasing bond exposure or exploring alternative assets that can provide additional stability and income.

Sectors Info

  • Technology
    19%
  • Financials
    13%
  • Industrials
    9%
  • Health Care
    8%
  • Consumer Discretionary
    8%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio is well-diversified across several sectors, with the largest allocations in technology (19.05%) and financial services (12.88%). This sectoral balance reflects a broad exposure to different economic areas, which can help mitigate risks associated with sector-specific downturns. However, the concentration in technology may lead to higher volatility, especially in times of economic uncertainty. To further enhance stability, consider reviewing sector weights and adjusting them to ensure alignment with your risk tolerance and market outlook.

Regions Info

  • North America
    51%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The geographic allocation is primarily focused on North America (51.22%), with additional exposure to Europe, Asia, and other regions. This distribution provides a strong foundation in developed markets, which tend to offer more stability. However, there is limited exposure to emerging markets, which could offer higher growth potential. To improve diversification and capture global opportunities, consider increasing exposure to underrepresented regions, while keeping in mind the associated risks and volatility.

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 current allocation could be optimized using the Efficient Frontier to achieve a better risk-return balance. The Efficient Frontier represents the set of optimal portfolios offering the highest expected return for a given level of risk. By adjusting the asset mix, you can potentially enhance returns without increasing risk. However, this optimization is based solely on the current assets and allocation changes between them, so it's important to consider your personal risk tolerance and investment goals when making adjustments.

Dividends Info

  • Vanguard Federal Money Market Fund Investor Shares 4.70%
  • Weighted yield (per year) 0.99%

The portfolio's dividend yield is relatively modest at 0.99%, largely influenced by the Vanguard Federal Money Market Fund's 4.7% yield. Dividends can provide a steady income stream and enhance total returns, especially in low-growth environments. For investors seeking income, consider increasing exposure to dividend-paying stocks or funds, which can offer both growth potential and regular income. Balancing dividend yield with growth objectives is key to achieving long-term financial goals.

Ongoing product costs Info

  • VANGUARD TARGET RETIREMENT 2055 FUND INVESTOR SHARES 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.08% for the Vanguard Target Retirement 2055 Fund. Low costs are advantageous as they can significantly enhance long-term returns by reducing the drag on performance. This efficient cost structure aligns with best practices and supports the portfolio's growth potential. To maintain this advantage, regularly review and compare fund expenses, considering lower-cost alternatives if necessary to optimize returns.

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