A balanced portfolio with broad diversification and low costs for steady growth

Report created on Jan 3, 2025

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 60% domestic stocks, 15% international stocks, 15% domestic bonds, and 10% international bonds. This allocation reflects a balanced approach, combining equities for growth and bonds for stability. Compared to a typical balanced portfolio, which might have a 60/40 stock-to-bond ratio, this portfolio leans slightly more towards equities. This tilt can offer higher growth potential but may also introduce more volatility. To maintain balance, consider regular rebalancing to ensure the asset mix aligns with your risk tolerance and investment goals.

Growth Info

Historically, this portfolio has achieved a compound annual growth rate (CAGR) of 9.56%, which is commendable for a balanced strategy. The maximum drawdown of -28.71% highlights the potential risks during market downturns. This performance is consistent with historical averages for balanced portfolios, which typically aim for moderate growth with controlled risk. Despite the drawdown, the long-term growth rate suggests resilience. It's crucial to remember that past performance doesn't guarantee future results, so maintaining a diversified approach is key.

Projection Info

Forward projections using Monte Carlo simulations show a median return of 109.57% over the investment horizon. This method uses historical data to simulate potential outcomes, providing a range of possibilities. While the 5th percentile indicates a potential loss of -8.6%, the 67th percentile suggests significant growth. These projections offer insight into potential future performance, but it's important to remember they are based on historical trends and assumptions, which may not fully capture future market conditions.

Asset classes Info

  • Stocks
    75%
  • Bonds
    25%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 74.57% in equities and 24.56% in bonds. This allocation provides a strong growth potential while maintaining some stability through bonds. Compared to typical balanced portfolios, which often have a 60/40 stock-to-bond ratio, this portfolio leans more towards equities. This higher equity allocation can enhance returns but may increase volatility. To ensure the portfolio aligns with your risk tolerance, consider periodically reviewing the asset class weights.

Sectors Info

  • Technology
    20%
  • Financials
    11%
  • Health Care
    8%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Telecommunications
    6%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation shows a strong concentration in technology at 20.43%, followed by financial services and healthcare. This composition is relatively aligned with global benchmarks, which often have significant tech exposure. A tech-heavy portfolio can experience higher volatility, especially during interest rate changes. To mitigate sector-specific risks, consider diversifying further by increasing exposure to underrepresented sectors such as energy or utilities, which may offer stability during market fluctuations.

Regions Info

  • North America
    61%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America at 60.92%, with limited exposure to emerging markets. This focus provides stability but may limit growth opportunities available in other regions. Compared to global benchmarks, which often have more diverse geographic allocations, this portfolio could benefit from increased international exposure. To enhance diversification and potential returns, consider gradually increasing investments in emerging markets or other underrepresented 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.

The portfolio is well-positioned on the Efficient Frontier, indicating a strong risk-return balance. This optimization suggests that the current asset allocation offers the best possible return for the level of risk taken. While this doesn't guarantee maximum diversification or other specific goals, it does provide a solid foundation for achieving a favorable risk-return ratio. To maintain this efficiency, consider periodic reviews and adjustments based on changing market conditions and personal circumstances.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total International Bond Index Fund ETF Shares 4.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 2.26%

The portfolio's overall dividend yield is 2.26%, with a notable contribution from bond ETFs. Dividends can provide a steady income stream, particularly important for investors seeking cash flow. Compared to typical balanced portfolios, this yield is relatively competitive, enhancing total returns. For those prioritizing income, consider maintaining or slightly increasing the allocation to dividend-paying assets. However, ensure this aligns with your overall investment strategy and risk tolerance.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Bond Index Fund ETF Shares 0.07%
  • 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's total expense ratio (TER) is impressively low at 0.04%, thanks to the use of Vanguard ETFs. Low costs are crucial for long-term performance, as they minimize the drag on returns. Compared to industry averages, this TER is highly competitive, supporting better net returns over time. To maintain cost efficiency, regularly review the fees associated with your investments and consider replacing higher-cost funds with similar low-cost alternatives if available.

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