A balanced portfolio with strong US equity focus and moderate international diversification

Report created on Dec 13, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is composed primarily of large-cap US equities through the Vanguard S&P 500 ETF, which constitutes 40% of the portfolio. Bonds make up 30%, providing a stable income stream and reducing overall volatility. The remaining allocations are in smaller cap and international stocks, offering growth potential and diversification. The asset mix reflects a balanced approach, suitable for investors seeking moderate growth while managing risk. It's crucial to understand how each component contributes to the portfolio's overall risk and return profile, ensuring that the chosen assets align with the investor's financial goals.

Growth Info

Historically, this portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 10.99%, which is quite robust. However, it has experienced a maximum drawdown of -26.85%, indicating potential volatility during market downturns. Understanding past performance helps set realistic expectations for future returns, but it’s important to remember that past performance is not always indicative of future results. Investors should consider how comfortable they are with potential fluctuations in value, especially during periods of economic uncertainty, to ensure alignment with their risk tolerance.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a range of potential returns. With 1,000 simulations, the portfolio's projected annualized return is 11.69%. While 95% of simulations showed positive returns, it's important to note that simulations are based on historical data and assumptions, which may not account for unprecedented market conditions. Investors should use these projections as a guide rather than a guarantee, maintaining flexibility to adjust their strategies as new information and market dynamics unfold.

Asset classes Info

  • Stocks
    70%
  • Bonds
    30%
  • Cash
    1%

The portfolio's asset allocation leans heavily towards stocks, with 69.7% in equities and 29.7% in bonds. This mix provides a balance between growth potential and income generation. Stocks typically offer higher long-term returns but come with increased volatility, while bonds can provide stability and reduce overall risk. Diversifying across asset classes helps mitigate the impact of market fluctuations on the portfolio. Investors should regularly review their allocation to ensure it aligns with their risk tolerance and investment objectives, making adjustments as necessary to maintain a balanced approach.

Sectors Info

  • Technology
    15%
  • Financials
    12%
  • Industrials
    9%
  • Consumer Discretionary
    9%
  • Health Care
    5%
  • Energy
    5%
  • Basic Materials
    4%
  • Telecommunications
    4%
  • Consumer Staples
    4%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation is fairly diversified, with the highest exposure in Technology at 15.06%, followed by Financial Services and Industrials. This distribution allows the portfolio to capitalize on growth in various sectors while spreading risk. However, the concentration in Technology could increase vulnerability to sector-specific downturns. It's important for investors to monitor sector performance and consider rebalancing if certain sectors become overly dominant. By maintaining a balanced sector allocation, the portfolio can better withstand economic shifts and capitalize on opportunities across different industries.

Regions Info

  • North America
    52%
  • Europe Developed
    8%
  • Japan
    5%
  • Australasia
    2%
  • Asia Emerging
    1%
  • Asia Developed
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly exposed to North America, with 51.66% allocation, followed by Europe Developed and Japan. This concentration in North America provides stability due to the region's mature markets but limits exposure to emerging markets' growth potential. Geographic diversification is essential for managing regional risks and capturing global opportunities. Investors may consider increasing exposure to underrepresented regions to enhance diversification and potentially improve returns. Monitoring geopolitical and economic developments can help inform decisions about geographic allocation adjustments.

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 can potentially be optimized by adjusting the current asset allocations to achieve a better risk-return ratio. This involves finding the optimal mix of assets that offers the highest expected return for a given level of risk. However, optimization is limited to the existing assets and does not account for potential changes in market conditions or investor goals. By periodically revisiting the portfolio's allocations and considering optimization strategies, investors can enhance their portfolio's efficiency and better align it with their risk tolerance and financial objectives.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.00%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.31%

The portfolio has a total dividend yield of 2.31%, contributing to overall returns through income generation. The Vanguard Total Bond Market Index Fund ETF and Avantis® International Small Cap Value ETF offer the highest yields at 3.6% and 3.0%, respectively. Dividends provide a steady income stream, which can be particularly beneficial during periods of market volatility. Reinvesting dividends can enhance compounding effects over time. Investors should assess the role of dividends in their strategy, ensuring that the yield aligns with their income needs and long-term growth objectives.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is 0.1%, which is relatively low and beneficial for long-term growth. Lower costs mean more of the portfolio's returns are retained by the investor. The Vanguard funds have particularly low expense ratios, contributing to cost efficiency. Managing costs is crucial for maximizing net returns. Investors should regularly review expense ratios and consider lower-cost alternatives if available. Keeping costs in check is a simple yet effective way to improve investment outcomes over time, ensuring that fees do not erode potential gains.

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