A balanced portfolio with equal allocation to US and international equities

Report created on Apr 12, 2025

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.

Positions

This portfolio is evenly split between the Vanguard S&P 500 ETF and the Vanguard Total International Stock Index Fund ETF Shares, each making up 50% of the portfolio. This structure offers a straightforward approach to diversification, with a focus on large-cap equities across the globe. Compared to a typical balanced benchmark, this portfolio lacks fixed-income assets, which might affect its stability during market downturns. To enhance diversification, consider incorporating bonds or other asset classes that could mitigate volatility and provide more consistent returns over time.

Growth Info

The portfolio has achieved a Compound Annual Growth Rate (CAGR) of 9.32%, indicating robust historical performance. This figure suggests that over a long period, the portfolio has grown at a steady pace. However, it experienced a maximum drawdown of -33.87%, which shows that it can be susceptible to significant declines during market turbulence. Benchmarking against similar portfolios, this performance is commendable but highlights the need for risk management strategies. Consider diversifying further or employing hedging techniques to reduce potential drawdowns in the future.

Projection Info

Monte Carlo simulations, which use historical data to project future potential outcomes, show an annualized return of 9.74% for this portfolio. With 953 out of 1,000 simulations resulting in positive returns, the outlook appears favorable. However, it's important to note that simulations are based on past data and can't predict future market conditions with certainty. The 5th percentile projection at 4.2% suggests that in adverse scenarios, returns could be modest. Regularly reviewing and adjusting the portfolio in response to market changes can help maintain its growth trajectory.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, accounting for 99% of the allocation, with a minimal 1% in cash. This concentration in equities suggests a strong focus on growth, which can lead to higher returns over time. However, it also increases exposure to market volatility. Compared to diversified benchmarks, the absence of fixed-income assets may lead to significant fluctuations during economic downturns. Introducing bonds or other non-correlated asset classes can provide stability and reduce overall portfolio risk, aligning with a balanced investment strategy.

Sectors Info

  • Technology
    23%
  • Financials
    18%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Utilities
    3%
  • Real Estate
    3%

The portfolio's sector allocation is diverse, with a notable 23% in technology, followed by financial services at 18%. This exposure aligns well with global benchmarks, offering a balanced approach to sector diversification. However, the technology sector's significant weight could lead to increased volatility, especially during periods of interest rate hikes. Maintaining a diverse sector allocation helps mitigate sector-specific risks. Regularly reviewing sector trends and adjusting allocations as needed can ensure the portfolio remains well-positioned to capitalize on growth opportunities while managing risk effectively.

Regions Info

  • North America
    54%
  • Europe Developed
    20%
  • Asia Emerging
    8%
  • Japan
    8%
  • Asia Developed
    5%
  • Australasia
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is diversified with 54% in North America and significant exposure to Europe and Asia. This allocation aligns with typical global benchmarks, providing a balanced approach to regional diversification. However, the portfolio's limited exposure to emerging markets may restrict growth potential. Emerging markets often offer higher growth rates but come with increased risk. Consider gradually increasing exposure to these regions to enhance potential returns while keeping an eye on geopolitical and economic developments that might impact performance.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    33%
  • Mid-cap
    17%
  • Small-cap
    2%

The portfolio is predominantly invested in large-cap stocks, with 46% in mega-cap and 33% in big-cap companies. This focus on well-established firms provides stability and reduced risk compared to smaller companies. However, the limited allocation to small and micro-cap stocks may restrict growth opportunities. Smaller companies often have higher growth potential but also come with increased volatility. Introducing a modest allocation to small-cap stocks can enhance diversification and provide exposure to potentially higher returns, balancing the overall risk within the portfolio.

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 could be optimized by adjusting the allocation between the current assets to achieve a better risk-return ratio. The Efficient Frontier is a concept that seeks the best possible risk-adjusted returns for a given level of risk. While the current allocation is balanced, slight adjustments could enhance efficiency. Regularly reviewing and fine-tuning the asset allocation, based on changing market conditions and personal financial goals, can help maintain an optimal balance between risk and return, ensuring long-term investment success.

Dividends Info

  • Vanguard S&P 500 ETF 1.40%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 2.35%

The portfolio's dividend yield stands at 2.35%, with the Vanguard S&P 500 ETF yielding 1.40% and the Vanguard Total International Stock Index Fund ETF Shares at 3.30%. This yield provides a steady stream of income, which can be particularly beneficial for investors seeking regular cash flow. Compared to typical benchmarks, this yield is competitive, contributing positively to total returns. However, reinvesting dividends can further enhance growth over time. Consider setting up automatic dividend reinvestment to maximize compounding effects and increase the portfolio's long-term value.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.05%
  • Weighted costs total (per year) 0.04%

The portfolio's costs are impressively low, with a Total Expense Ratio (TER) of 0.04%. This low-cost structure is a significant advantage, as it minimizes drag on returns over time. Compared to industry averages, these fees are highly competitive, supporting better long-term performance. Keeping costs low is a key factor in successful investing, as it allows more of the portfolio's returns to be retained. Regularly reviewing and optimizing costs, while maintaining a focus on quality investments, can ensure that the portfolio continues to deliver strong net returns.

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