A broadly diversified balanced portfolio with strong US equity focus and low costs

Report created on Jan 9, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with nearly 75% in the Vanguard Total Stock Market Index Fund ETF and the remaining 25% in the Vanguard Total International Stock Index Fund ETF. This composition aligns with a balanced investment strategy, offering broad diversification across global markets. The portfolio's structure is consistent with common benchmarks for balanced portfolios, which typically include a mix of domestic and international equities. To enhance diversification further, consider incorporating other asset classes like bonds or real estate, which can provide additional stability during market volatility.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 11.89%. This indicates a strong growth trajectory over time, outperforming many traditional benchmarks. However, the portfolio also experienced a significant maximum drawdown of -34.67%, highlighting its vulnerability during market downturns. While past performance is not indicative of future results, this historical context underscores the importance of maintaining a diversified mix to manage risk effectively. Regularly reviewing performance against benchmarks can help ensure the portfolio remains aligned with investment goals.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential portfolio returns. The simulations indicate a 50th percentile outcome of 248.44% and a 67th percentile of 373.34%. While these projections are promising, it's important to note the inherent uncertainty in such models. They rely on past data and assumptions that may not hold true in the future. Regularly revisiting projections and adjusting strategies based on changing market conditions can help optimize the portfolio's potential returns.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's allocation is almost entirely in stocks, with a negligible portion in cash and other assets. This heavy equity concentration can drive growth but also increases exposure to market volatility. Diversification across asset classes is vital for managing risk and achieving a balanced risk-return profile. Consider incorporating bonds or alternative investments to reduce volatility and enhance stability. Comparing the current allocation to common benchmarks, which often include a mix of stocks and bonds, can provide insights into potential adjustments for improved diversification.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation shows a significant concentration in technology at 26.34%, followed by financial services and healthcare. This focus on tech aligns with recent market trends but may expose the portfolio to higher volatility, especially during interest rate fluctuations. A well-diversified sector mix can mitigate risks associated with sector-specific downturns. Regularly reviewing sector weights and considering adjustments to align with broader market benchmarks can enhance diversification and reduce potential risks.

Regions Info

  • North America
    77%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily skewed towards North America, with over 76% exposure, followed by Europe and Asia. This concentration may limit diversification benefits and expose the portfolio to regional economic risks. A more balanced geographic allocation can help mitigate risks associated with regional downturns and currency fluctuations. Comparing the current allocation to global benchmarks and considering increasing exposure to underrepresented regions can enhance diversification and potentially improve risk-adjusted returns.

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 be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on the current assets. This optimization focuses on reallocating existing assets to achieve the most efficient balance. While the portfolio is already aligned with many benchmarks, exploring potential adjustments can enhance returns without significantly increasing risk. Regularly reviewing asset allocation and considering optimization strategies can help maintain an ideal risk-return profile over time.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.83%

The portfolio's dividend yield stands at 1.83%, with the international ETF contributing a higher yield. Dividends can provide a steady income stream and contribute to overall returns, especially in low-growth environments. For income-focused investors, maintaining or increasing exposure to high-dividend assets can enhance cash flow. However, ensure that dividend-paying assets align with the broader investment strategy and risk tolerance. Regularly reviewing dividend yields and their impact on portfolio returns can help optimize income generation.

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) 0.04%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of just 0.04%. Low costs enhance long-term returns by minimizing the drag on performance. This cost efficiency aligns well with best practices for maintaining a high-performing portfolio. Regularly reviewing and comparing costs against similar investment options can ensure ongoing cost-effectiveness. If possible, consider replacing higher-cost assets with lower-cost alternatives to further improve the portfolio's expense efficiency.

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