Balanced portfolio with strong diversification across asset classes and regions

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits an investor seeking balanced growth with moderate risk tolerance and a medium to long-term horizon. It is designed for individuals who value diversification across asset classes and geographic regions, aiming for steady growth while managing risk. The inclusion of both equities and bonds provides a mix of growth and stability, making it ideal for those looking to build wealth over time without taking on excessive risk. Such investors typically appreciate a well-rounded approach that balances potential returns with risk mitigation.

Positions

  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    25.00%
  • Vanguard S&P 500 ETF
    VOO - US9229083632
    25.00%
  • Avantis® International Small Cap Value ETF
    AVDV - US0250728021
    10.00%
  • Avantis® Emerging Markets Value ETF
    AVES - US0250723725
    10.00%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares
    EDV - US9219107094
    10.00%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares
    VEA - US9219438580
    10.00%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares
    VWO - US9220428588
    10.00%

This portfolio consists of a mix of ETFs, with a significant allocation to U.S. equities and international markets. The Vanguard S&P 500 ETF and Avantis U.S. Small Cap Value ETF each hold 25% of the portfolio, emphasizing a focus on U.S. equity. International exposure is provided by Avantis International Small Cap Value ETF and Avantis Emerging Markets Value ETF, among others. A 10% allocation to the Vanguard Extended Duration Treasury Index Fund provides some bond exposure. This composition aligns well with balanced portfolio benchmarks, offering both growth potential and risk mitigation. Ensuring this mix aligns with long-term goals is crucial for maintaining a balanced approach.

Growth Info

Historically, the portfolio has achieved a CAGR of 5.99%, which is a reasonable return for a balanced profile. The maximum drawdown of -25% indicates some vulnerability during market downturns, typical for equity-heavy portfolios. This return is in line with moderate-risk benchmarks, showing steady growth over time. However, it's important to remember that past performance doesn't guarantee future results. Monitoring market conditions and adjusting allocations as needed can help maintain a stable return profile while mitigating potential losses during volatile periods.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast future performance, suggests a median return of 22.83% over the simulation period. However, the 5th percentile indicates potential losses of up to -62.63%, highlighting the inherent uncertainties in projections. While 623 out of 1,000 simulations showed positive returns, the average annualized return was 3.16%. This underscores the importance of understanding that simulations provide a range of outcomes rather than precise predictions. Regularly reviewing and adjusting the portfolio based on changing market conditions can help manage risks and optimize potential returns.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%
  • Other
    0%
  • No data
    0%

The portfolio is predominantly invested in stocks, accounting for approximately 89.5% of the total allocation, with bonds making up 10%. This heavy equity weighting suggests a focus on growth, consistent with a balanced risk profile. The inclusion of bonds offers some stability, cushioning against stock market volatility. Compared to typical balanced benchmarks, this allocation is slightly more aggressive, favoring equities over fixed income. To ensure the portfolio remains aligned with risk tolerance and investment goals, consider periodically reassessing the balance between stocks and bonds, especially during market shifts.

Sectors Info

  • Financials
    19%
  • Technology
    14%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Energy
    7%
  • Basic Materials
    6%
  • Health Care
    5%
  • Consumer Staples
    5%
  • Telecommunications
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is well-diversified, with significant investments in financial services, technology, and industrials. Financial services hold the largest share at 19.05%, while technology follows at 14.29%. This distribution aligns closely with global equity benchmarks, offering exposure to both growth-oriented and stable sectors. However, the portfolio's exposure to real estate and utilities is minimal, which could limit diversification benefits. Keeping an eye on sector trends and potential shifts, such as interest rate changes impacting technology, can help in fine-tuning sector allocations to optimize risk and return.

Regions Info

  • North America
    52%
  • Asia Emerging
    11%
  • Europe Developed
    10%
  • Asia Developed
    6%
  • Japan
    5%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Australasia
    2%
  • Europe Emerging
    0%

Geographically, the portfolio is heavily weighted towards North America, representing 51.61% of the allocation. This is complemented by significant exposure to emerging markets in Asia and developed markets in Europe. This geographic distribution helps diversify risk by spreading investments across different economic regions. However, the underrepresentation in regions like Africa/Middle East and Latin America may limit exposure to potentially high-growth markets. Regularly reviewing geographic allocations and considering adjustments based on global economic conditions can enhance diversification and align with long-term investment goals.

Redundant positions Info

  • Avantis® International Small Cap Value ETF
    Vanguard FTSE Developed Markets Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation between certain assets, such as the Avantis International Small Cap Value ETF and the Vanguard FTSE Developed Markets Index Fund ETF Shares. This correlation suggests that these assets tend to move in tandem, which may reduce diversification benefits during market downturns. While some correlation is expected, excessive overlap can limit the effectiveness of risk management strategies. To enhance diversification, consider reducing exposure to highly correlated assets and exploring alternatives that provide distinct performance characteristics.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® Emerging Markets Value ETF 1.00%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.70%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 2.20%

The portfolio's overall dividend yield is 2.2%, with notable contributions from the Vanguard Extended Duration Treasury Index Fund at 4.7% and the Avantis International Small Cap Value ETF at 4.3%. Dividends can provide a steady income stream, which is beneficial for reinvestment or income-focused strategies. This yield aligns with typical balanced portfolios, offering a mix of income and growth potential. Maintaining a focus on dividend-producing assets can support portfolio stability, especially during periods of market volatility, while also contributing to total returns over time.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is impressively low and supports better long-term performance by minimizing costs. The Vanguard ETFs, in particular, offer very low fees, which is a strong positive for cost-conscious investors. Keeping costs low is crucial as it directly impacts net returns, especially over extended investment horizons. Regularly reviewing the expense ratios of portfolio holdings and considering lower-cost alternatives if necessary can further enhance net returns without sacrificing diversification or growth potential.

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.

The portfolio's current asset allocation suggests potential for optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. While the portfolio is well-diversified, focusing on reducing exposure to highly correlated assets could improve efficiency. The Efficient Frontier helps identify the optimal balance between risk and return based solely on the existing assets. Regularly reassessing the portfolio using this framework can ensure that it remains aligned with the investor's risk tolerance and financial goals, maximizing potential returns for the given level of risk.

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