A balanced ETF portfolio with a cautious risk profile and strong diversification

Report created on Dec 23, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three major Vanguard ETFs: 50% in U.S. stocks, 30% in bonds, and 20% in international stocks. This structure offers a balanced mix of equity and fixed-income investments, aligning well with a cautious risk profile. Compared to common benchmarks, this allocation is conservative, favoring stability over aggressive growth. It's crucial for investors to periodically review asset allocations to ensure they align with current financial goals and market conditions.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 8.41% and a maximum drawdown of -26.75%. This indicates a solid growth trajectory with manageable risk. When compared to similar portfolios, these figures suggest a well-balanced approach to risk and return. Investors should remember that past performance doesn't guarantee future results, and it's important to stay informed about market trends that could impact returns.

Projection Info

Using Monte Carlo simulations, which project potential outcomes based on historical data, this portfolio shows a median growth of 134.29% over the long term. The simulations indicate a 94% chance of positive returns, with an average annualized return of 7.41%. While these projections are promising, it's essential to acknowledge that they are based on historical data and assumptions, which may not account for future market changes or unexpected events.

Asset classes Info

  • Stocks
    69%
  • Bonds
    30%
  • Cash
    1%

The portfolio primarily consists of stock (69.5%) and bond (29.5%) asset classes, with minimal cash holdings. This allocation reflects a strong emphasis on equities for growth potential, balanced by bonds for income and stability. Compared to typical benchmarks, this mix is well-aligned with a cautious investor's needs, offering a good balance between risk and reward. It's advisable to periodically reassess asset allocations to ensure they remain in line with an investor's evolving financial goals and risk tolerance.

Sectors Info

  • Technology
    18%
  • Financials
    11%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation shows a significant focus on technology (18%) and financial services (11%), with healthcare and industrials also well-represented. This sector balance aligns closely with broad market benchmarks, indicating a diversified approach. However, the concentration in technology could lead to higher volatility during periods of market uncertainty. Investors might consider monitoring sector trends closely and adjusting allocations if necessary to maintain diversification and manage risk effectively.

Regions Info

  • North America
    51%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is heavily weighted towards North America (51%), with modest exposure to Europe, Asia, and other regions. This concentration in North America aligns with many global benchmarks but may limit exposure to growth opportunities in emerging markets. Investors should consider whether their geographic exposure aligns with their investment goals and risk tolerance, potentially increasing diversification by exploring opportunities in underrepresented regions.

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 appears to be optimized along the Efficient Frontier, offering a favorable risk-return balance given its current asset mix. The Efficient Frontier represents the best possible risk-return ratio for a given set of investments. This optimization suggests that the portfolio is well-constructed, though investors should periodically review and adjust allocations to maintain efficiency as market conditions and personal goals evolve.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.76%

With a total dividend yield of 1.76%, the portfolio provides a modest income stream. The bond ETF contributes the most to this yield, offering 3.3%, while the stock ETFs provide lower yields. For investors seeking steady income, this yield is a positive feature, although it may not suffice for those relying heavily on dividends. It's advisable to regularly review dividend policies and consider reinvesting dividends to enhance long-term growth potential.

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. Keeping costs low is crucial for maximizing long-term returns, as high fees can erode investment gains over time. This cost efficiency is a strong point of the portfolio, allowing more of the returns to be reinvested. Investors should continue to monitor expense ratios and explore lower-cost alternatives if they become available.

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