A globally focused portfolio with a single ETF emphasizing ESG principles and moderate risk
Report created on Jan 20, 2025Risk profile
5/7
Diversification profile
4/5
Positions
-
VS Vanguard ESG International Stock
VSGX - US9219107250 100.00%
The portfolio consists entirely of the Vanguard ESG International Stock ETF, which focuses on international equities with an emphasis on environmental, social, and governance (ESG) criteria. This single-ETF structure means the portfolio lacks diversification across different asset types, such as bonds or real estate, which are often included for risk management. While the ETF itself is diversified across various sectors and regions, relying solely on one ETF can increase vulnerability to specific market trends or sector downturns. Consider adding other asset classes to balance risk and potentially enhance returns.
Growth
Historically, this portfolio has shown a Compound Annual Growth Rate (CAGR) of 5.78%, which provides a moderate return for a growth-focused investment. However, it has also experienced a significant maximum drawdown of -33.15%, indicating vulnerability during market downturns. Compared to a diversified benchmark, this performance suggests a need for caution during volatile market periods. While past performance is informative, it's not a guarantee of future results. To mitigate drawdowns, consider incorporating assets that historically perform well during market declines.
Projection
Using Monte Carlo simulations, which run thousands of scenarios based on historical data to predict future outcomes, the portfolio shows a wide range of potential returns. The median outcome suggests an 88.4% increase, but with a 5th percentile outcome of -40%, highlighting significant downside risk. With 810 out of 1,000 simulations showing positive returns, there's a reasonable chance of growth, but the variability underscores the need for risk management. Remember, simulations are based on past data and assumptions, which may not fully capture future market conditions.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is heavily weighted in stocks, accounting for 99% of its composition, with a negligible 1% in cash. This allocation aligns with a growth-focused strategy but lacks diversification across asset classes, such as bonds or alternative investments, which can provide stability and income. A diversified asset allocation typically helps manage risk and smooth out returns over time. Consider introducing a mix of asset classes to enhance diversification and potentially improve the risk-return profile.
Sectors
- Financials 27%
- Technology 17%
- Consumer Discretionary 12%
- Health Care 11%
- Industrials 11%
- Consumer Staples 6%
- Telecommunications 6%
- Basic Materials 5%
- Real Estate 4%
- Utilities 1%
Sector allocation is diverse, with significant exposure to financial services (27%), technology (17%), and consumer cyclicals (12%). This sector mix can drive growth but also introduces volatility, especially in economic downturns. Notably, the absence of energy exposure could limit potential benefits during periods of rising energy prices. Sector diversification helps mitigate risks associated with sector-specific downturns. Assess whether sector weights align with your risk tolerance and consider adjusting to enhance balance and resilience.
Regions
- Europe Developed 35%
- Japan 17%
- Asia Emerging 16%
- Asia 13%
- North America 8%
- Australasia 5%
- Africa/Middle East 4%
- Latin America 2%
- Europe Emerging 1%
Geographically, the portfolio is well-diversified, with 35% in Europe Developed, 17% in Japan, and significant exposure to various other regions. This global reach offers diversification benefits but also exposes the portfolio to currency fluctuations and geopolitical risks. Compared to a typical benchmark, the portfolio is underweight in North America, which might limit exposure to U.S. market growth. Consider balancing geographic exposure to align with global economic trends and mitigate regional risks.
Market capitalization
- Mega-cap 43%
- Large-cap 31%
- Mid-cap 19%
- Small-cap 4%
The portfolio is predominantly invested in large-cap stocks, with 43% in mega caps and 31% in big caps, which typically offer stability and lower volatility. However, there's limited exposure to small and micro caps, which can provide higher growth potential but also come with increased risk. This market cap distribution aligns with a conservative growth strategy. To capture potential high-growth opportunities, consider increasing exposure to smaller-cap stocks while being mindful of the associated risks.
Dividends
- Vanguard ESG International Stock 2.20%
- Weighted yield (per year) 2.20%
The portfolio's dividend yield is 2.20%, which can provide a steady income stream and contribute to total returns. Dividends are particularly relevant for growth-focused investors seeking additional income to reinvest. While the yield is moderate, it's important to balance dividend income with growth potential, as high-yielding stocks can sometimes underperform in terms of capital appreciation. Consider whether the current dividend yield aligns with your income needs and long-term growth objectives.
Ongoing product costs
- Vanguard ESG International Stock 0.12%
- Weighted costs total (per year) 0.12%
The Vanguard ESG International Stock ETF has a Total Expense Ratio (TER) of 0.12%, which is impressively low. Low costs are advantageous as they can significantly enhance long-term returns by reducing the drag on performance. This cost efficiency supports the portfolio's growth focus, allowing more of your investment to compound over time. Continue to monitor costs, ensuring they remain competitive, and consider this an area of strength in your investment strategy.
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