A balanced portfolio with strong diversification and moderate risk exposure

Report created on Mar 22, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of four Vanguard ETFs, with a significant allocation to the Vanguard Total Stock Market Index Fund ETF Shares at 50%. The remaining assets are divided among the Vanguard FTSE Developed Markets Index Fund ETF Shares (25%), Vanguard FTSE Emerging Markets Index Fund ETF Shares (15%), and Vanguard Extended Duration Treasury Index Fund ETF Shares (10%). This structure reflects a balanced approach, leaning towards equities but with a notable bond component for stability. Comparing to a benchmark, this composition is well-diversified and aligns with a balanced risk profile, making it suitable for moderate growth while managing volatility.

Growth Info

Historically, the portfolio has delivered a robust CAGR of 9.10%, indicating solid growth over time. The maximum drawdown of -29.90% highlights potential volatility, but this is typical for equity-heavy portfolios. With only 25 days contributing to 90% of returns, it underscores the importance of staying invested during market fluctuations. Compared to benchmarks, this performance is commendable, suggesting that the portfolio has navigated market cycles effectively. Investors should remain aware that past performance doesn't guarantee future results, but the historical resilience provides a measure of confidence.

Projection Info

Monte Carlo simulations, using historical data, project a range of potential outcomes for the portfolio. With 1,000 simulations, the median (50th percentile) outcome suggests a near doubling of investment, while the 5th percentile indicates potential losses. An annualized return of 6.65% reflects a moderate growth expectation. It's crucial to remember that these projections are based on past data and can't predict future results with certainty. However, they provide a useful framework for understanding potential risks and rewards, helping investors set realistic expectations.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio's asset allocation is heavily weighted towards stocks (89%), with a smaller allocation to bonds (10%) and cash (1%). This allocation reflects a growth-oriented strategy with a moderate risk profile. Compared to typical balanced portfolios, this composition is slightly more aggressive, favoring equities for higher potential returns. The bond allocation provides a buffer against market volatility, offering some stability. Investors should periodically review this allocation to ensure it aligns with their risk tolerance and investment goals, adjusting as needed to maintain balance.

Sectors Info

  • Technology
    21%
  • Financials
    16%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is well-diversified across sectors, with the largest allocations in Technology (21%) and Financial Services (16%). Such sectoral exposure is typical in broad market index funds, providing a balanced approach. However, tech-heavy portfolios can experience higher volatility during interest rate hikes or market corrections. The inclusion of Consumer Cyclicals, Industrials, and Healthcare adds further balance, ensuring exposure to different economic cycles. This sectoral balance aligns well with benchmark norms, offering a diversified approach that mitigates sector-specific risks.

Regions Info

  • North America
    53%
  • Europe Developed
    13%
  • Asia Emerging
    9%
  • Japan
    5%
  • Asia Developed
    5%
  • Africa/Middle East
    2%
  • Australasia
    2%
  • Latin America
    1%

Geographic exposure is primarily concentrated in North America (53%), with additional allocations to Europe Developed (13%) and Asia Emerging (9%). This distribution aligns with global market benchmarks, providing a balanced regional exposure. However, the portfolio is slightly underweight in emerging markets, which could limit potential growth opportunities. Increasing exposure to these regions might enhance diversification and capture growth in developing economies. Investors should consider their comfort with regional risks and opportunities when adjusting geographic allocations.

Market capitalization Info

  • Mega-cap
    39%
  • Large-cap
    27%
  • Mid-cap
    17%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio's market capitalization distribution is skewed towards larger companies, with Mega (39%) and Big (27%) caps dominating. This focus on larger, established companies offers stability and less volatility compared to small-cap stocks. However, the presence of Medium (17%), Small (5%), and Micro (1%) caps adds a growth element, potentially boosting returns. This mix aligns with a balanced strategy, combining the reliability of large caps with the growth potential of smaller companies. Investors should reassess this distribution periodically to ensure it matches their growth and risk preferences.

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 risk-return ratio for a given set of assets. This optimization focuses on adjusting the current asset allocation to achieve maximum returns for a given level of risk. It doesn't necessarily mean adding new assets but rather reallocating existing ones. By fine-tuning the balance between stocks and bonds, investors can potentially improve their portfolio's efficiency. This approach ensures that the portfolio is aligned with the investor's risk tolerance and return expectations.

Dividends Info

  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 2.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.16%

The portfolio's overall dividend yield is 2.16%, with the Vanguard Extended Duration Treasury Index Fund ETF Shares offering the highest yield at 4.40%. Dividends contribute to total returns, providing a steady income stream, especially in volatile markets. For investors seeking income, this yield is attractive, supplementing capital gains. However, it's essential to balance dividend yields with growth potential, as high yields can sometimes indicate lower growth prospects. Investors should consider their income needs and growth objectives when evaluating dividend contributions to their portfolio.

Ongoing product costs Info

  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, minimizing the impact of costs on long-term returns. Vanguard funds are known for their cost efficiency, which supports better net returns over time. Compared to industry averages, these costs are highly competitive, allowing more of the portfolio's returns to remain in the investor's hands. While already optimized, investors should continue to monitor expense ratios, as reducing costs is one of the most effective ways to enhance portfolio performance over the long term.

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