A balanced portfolio with strong diversification and moderate risk for long-term growth potential
Report created on Dec 6, 2024Risk profile
4/7
Diversification profile
5/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 60.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 20.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00%
The portfolio is composed of three main Vanguard ETFs, with a strong emphasis on equities. The Vanguard Total Stock Market Index Fund ETF Shares make up 60% of the portfolio, while the Vanguard Total Bond Market Index Fund ETF Shares and Vanguard Total International Stock Index Fund ETF Shares each account for 20%. This composition reflects a balanced approach, combining growth potential from stocks with stability from bonds. Such a mix can help mitigate volatility while still providing opportunities for capital appreciation. To maintain this balance, consider periodically rebalancing the portfolio to ensure asset allocations remain aligned with your investment goals.
Growth
Historically, the portfolio has shown a solid compound annual growth rate (CAGR) of 10%, indicating robust performance. However, it has also experienced a maximum drawdown of nearly 30%, highlighting potential volatility. Understanding past performance is crucial, as it provides insight into how the portfolio might react in different market conditions. While past performance is not a guarantee of future results, it can offer a benchmark for setting expectations. Consider maintaining a diversified approach to help weather potential downturns while capitalizing on growth opportunities.
Projection
The forward projection uses Monte Carlo simulations, a method that models potential future outcomes based on historical data. With 1,000 simulations, the portfolio shows a median expected return of 145.75% and an annualized return of 7.7%. The simulations also reveal a 95% probability of positive returns, suggesting a favorable outlook. However, it's important to note that these projections are based on historical data and cannot predict future market conditions accurately. Regularly review the portfolio's performance and adjust allocations to align with changing market dynamics and personal risk tolerance.
Asset classes
- Stocks 80%
- Bonds 20%
- Cash 1%
The portfolio's asset class allocation is predominantly in stocks (79.57%) and bonds (19.78%), with minimal exposure to cash and other categories. This allocation provides a strong foundation for growth while maintaining some stability through bonds. Stocks offer the potential for higher returns, whereas bonds can cushion against market volatility. Diversifying across asset classes is crucial for managing risk and enhancing returns. Consider maintaining this balance or adjusting it based on your risk tolerance and investment horizon to optimize the risk-return profile.
Sectors
- Technology 21%
- Financials 12%
- Health Care 9%
- Consumer Discretionary 8%
- Industrials 8%
- Telecommunications 6%
- Consumer Staples 5%
- Energy 3%
- Basic Materials 3%
- Real Estate 2%
- Utilities 2%
Sector allocation shows a significant concentration in technology (21.06%) and financial services (12.17%), with smaller allocations across various other sectors. While technology and financials have driven growth in recent years, over-concentration in any sector can increase risk. Diversification across sectors can help mitigate this risk and capture opportunities across different parts of the economy. Regularly review sector allocations to ensure they align with broader economic trends and personal investment goals, adjusting as necessary to maintain a balanced approach.
Regions
- North America 61%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
The portfolio's geographic exposure is heavily weighted towards North America (61.27%), with additional allocations in Europe, Asia, and other regions. This concentration reflects a focus on developed markets, which can provide stability and growth. However, it also limits exposure to emerging markets, which may offer higher growth potential. Geographic diversification is essential for managing risk and capitalizing on global opportunities. Consider increasing exposure to underrepresented regions to enhance diversification and potentially improve 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.
Using the Efficient Frontier, this portfolio can potentially be optimized to achieve the best possible risk-return ratio. Optimization involves adjusting the weights of current assets to enhance efficiency. This doesn't necessarily mean adding new assets but rather reallocating existing ones to improve the balance between risk and return. Regularly reassess the portfolio's position on the Efficient Frontier to ensure it remains aligned with your risk tolerance and investment objectives, making adjustments as needed to optimize performance.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Weighted yield (per year) 2.02%
The portfolio has a total dividend yield of 2.02%, with contributions from all three ETFs. Dividends can provide a steady income stream, which is particularly valuable during periods of market volatility. Reinvesting dividends can also enhance long-term growth through compounding. While dividends are a crucial component of total returns, they should be considered alongside other factors such as capital appreciation and risk. Ensure that the dividend strategy aligns with your income needs and overall investment objectives.
Ongoing product costs
- Vanguard Total Bond Market Index Fund ETF Shares 0.03%
- 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 a low 0.04%, indicating cost-effectiveness. Lower costs can significantly enhance long-term returns by minimizing the drag on performance. Vanguard's ETFs are known for their low fees, which is a key advantage in this portfolio. While costs are already optimized, it's essential to remain vigilant about any fee changes that could impact returns. Regularly review the cost structure and consider alternatives if fees increase or if other options become available that offer better value.
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