A highly diversified balanced portfolio with a strong focus on US equities

Report created on Jan 11, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 70% in a US stock market ETF and 25% in an international stock ETF. This composition aligns with a typical balanced portfolio, offering potential growth through equity investments while maintaining a small 5% allocation to bonds for stability. The bond component is slightly lower than the typical benchmark for balanced portfolios, which often have around 20-40% in fixed income. Increasing the bond allocation could reduce volatility and provide a buffer during market downturns, enhancing overall stability.

Growth Info

Historically, the portfolio has delivered a commendable CAGR of 11.19%, indicating substantial growth over time. However, it also experienced a significant maximum drawdown of -33.51%, highlighting potential vulnerability during market downturns. This performance aligns well with equity-heavy portfolios, which tend to offer higher returns but with increased volatility. Investors should be prepared for fluctuations and consider whether the potential for high returns justifies the risk. Balancing the portfolio with more bonds could mitigate some of the downside risk.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a median potential growth of 147% over the investment horizon. However, it also indicates a 5% chance of experiencing an 8.22% loss. While simulations provide useful insights, they rely on past data and cannot predict future market conditions with certainty. Diversifying further across asset classes and geographies could help manage risks associated with unpredictable market movements and improve the chances of achieving desired outcomes.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%
  • Cash
    1%

The portfolio's asset allocation is heavily skewed towards equities, with 94.35% in stocks and only 4.92% in bonds. This allocation is typical for growth-focused portfolios but may not provide sufficient diversification benefits that bonds offer during market volatility. Increasing the bond allocation could enhance the risk-return profile by providing more stable returns and reducing overall portfolio volatility. A diversified mix of asset classes is crucial for managing risk and achieving long-term investment goals.

Sectors Info

  • Technology
    25%
  • Financials
    15%
  • Health Care
    10%
  • Industrials
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio exhibits a significant concentration in the technology sector, comprising 24.83% of the total allocation. While this aligns with current market trends, it may lead to increased volatility, especially during periods of tech sector instability. A more balanced sector allocation could reduce risk and provide smoother returns. Consider diversifying into underrepresented sectors like utilities or consumer defensive, which often perform well during economic downturns, to enhance overall portfolio stability.

Regions Info

  • North America
    72%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with 71.67% exposure, which limits diversification benefits. While this concentration can capitalize on the robust US market, it may also expose the portfolio to regional risks. Expanding exposure to other regions, such as emerging markets or Europe, could provide diversification benefits and tap into growth opportunities outside North America. A more globally balanced portfolio can mitigate risks associated with regional economic downturns.

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 could potentially be optimized using the Efficient Frontier to achieve a better risk-return ratio, focusing on reallocating existing assets for improved efficiency. The Efficient Frontier is a theoretical construct that identifies the optimal asset mix for the best possible return for a given level of risk. By adjusting the current asset allocation, the portfolio could achieve a more favorable balance between risk and return, though it may not necessarily enhance diversification.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.94%

With a total dividend yield of 1.94%, the portfolio provides a modest income stream, primarily from the bond and international stock ETFs. This yield can enhance total returns, particularly in low-interest-rate environments. Investors seeking higher income may consider increasing allocations to dividend-focused assets or funds. However, it's essential to balance income needs with growth objectives, ensuring the portfolio remains aligned with long-term investment goals and risk tolerance.

Ongoing product costs Info

  • 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 impressively low at 0.04%, thanks to the use of cost-effective Vanguard ETFs. Low costs are a significant advantage, as they enhance net returns over time. Investors should continue to monitor expenses and consider replacing any higher-cost investments with lower-cost alternatives if available. Keeping costs low is a key factor in maximizing long-term performance, allowing more of the portfolio's returns to compound over time.

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