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A balanced portfolio with strong US focus and moderate costs offering high diversification

Report created on Jan 8, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification
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Positions

This portfolio is primarily composed of mutual funds and ETFs, with a significant 56% allocation to the Vanguard Target Retirement 2060 Fund. The remaining assets are diversified across various funds and a small percentage in common stock. Compared to a typical balanced portfolio, this one leans heavily on fund investments, which can provide broad market exposure and reduce individual stock risk. While this structure supports diversification, it might lack the flexibility of direct stock investments. Consider maintaining the current fund-heavy structure for stability, but explore adding more individual stocks if seeking higher potential returns.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 11.2%, outperforming many common benchmarks. This indicates robust growth potential, although the maximum drawdown of -32.33% highlights vulnerability during market downturns. The concentrated days contributing to returns suggest that market timing could be crucial. While past performance doesn't guarantee future success, maintaining a diversified approach can help mitigate risks. Consider reviewing the portfolio's performance periodically to ensure it aligns with your long-term financial goals.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, suggest a wide range of potential returns for this portfolio. With an annualized return of 13.81% across simulations, there's a high likelihood of positive returns. However, it's important to note that these projections rely on past data and market conditions can change. The 5th percentile projection shows a potential downside, emphasizing the need for a risk management strategy. Regularly reassess your risk tolerance and adjust asset allocations to align with changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    93%
  • Bonds
    5%
  • Cash
    2%

The portfolio is heavily weighted towards stocks, which make up approximately 93% of the total allocation. This is typical for a growth-oriented strategy but may not suit investors seeking more stability. Bonds and cash represent a small fraction, providing limited downside protection. Compared to benchmark norms, this allocation is aggressive, favoring capital appreciation over income generation. Consider increasing the bond allocation to reduce volatility, especially if nearing retirement or with lower risk tolerance. This shift can help balance growth with income needs and improve overall portfolio stability.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Health Care
    11%
  • Industrials
    11%
  • Consumer Discretionary
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%
  • Consumer Discretionary
    1%

Sector allocation reveals a significant concentration in technology (25.78%), followed by financial services and healthcare. This tech-heavy focus can drive growth but also introduces volatility, particularly during periods of interest rate changes. The sector distribution mirrors common benchmarks, indicating a well-diversified approach. However, exposure to consumer cyclicals is notably low, which might miss out on potential growth opportunities. Consider periodically reviewing sector allocations to ensure they align with market trends and personal risk preferences, potentially adding exposure to underrepresented sectors for enhanced diversification.

Regions Info

  • North America
    78%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    3%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic allocation is predominantly in North America (77.89%), with limited exposure to other regions. This concentration provides stability and familiarity but may limit growth opportunities available in emerging markets. Compared to global benchmarks, this allocation is heavily skewed towards domestic markets, which can be both a strength and a limitation. To enhance diversification and potentially capture higher returns, consider increasing exposure to international markets, particularly in regions with strong economic growth prospects. This adjustment can help balance risk and reward across different economic environments.

Redundant positions Info

  • iShares Core S&P 500 ETF
    AMERICAN FUNDS FUNDAMENTAL INVESTORS CLASS A
    VANGUARD 500 INDEX FUND ADMIRAL SHARES
    VANGUARD INSTITUTIONAL TOTAL STOCK MARKET INDEX FUND INSTITUTIONAL SHARES
    Vanguard Total Stock Market Index Fund ETF Shares
    NEW PERSPECTIVE FUND CLASS A
    GROWTH FUND OF AMERICA CLASS A
    VANGUARD TARGET RETIREMENT 2060 FUND INVESTOR SHARES
    High correlation

The portfolio contains several highly correlated assets, meaning they tend to move in the same direction. This correlation can limit diversification benefits, particularly during market downturns. While correlated assets can provide consistent returns in stable markets, they may increase risk during volatility. To enhance diversification, consider reducing exposure to overlapping funds and exploring alternative investments with lower correlation. This strategy can improve risk management and potentially enhance returns by capturing different market dynamics.

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.

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While the portfolio is well-diversified, optimizing for the Efficient Frontier could enhance the risk-return ratio. This involves adjusting current asset allocations to achieve the best possible balance between risk and returns. However, it's important to note that optimization focuses solely on existing assets and may not account for other investment goals like income generation or ethical considerations. Consider consulting with a financial advisor to explore optimization opportunities that align with your specific objectives and constraints.

Dividends Info

  • GROWTH FUND OF AMERICA CLASS A 8.90%
  • AMERICAN FUNDS FUNDAMENTAL INVESTORS CLASS A 0.60%
  • First Merchants Corporation 2.70%
  • iShares Core S&P 500 ETF 1.30%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 1.20%
  • VANGUARD INSTITUTIONAL TOTAL STOCK MARKET INDEX FUND INSTITUTIONAL SHARES 1.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Value Index Fund ETF Shares 1.70%
  • Weighted yield (per year) 1.44%

The portfolio's overall dividend yield is 1.44%, which contributes a modest income stream. While not the primary focus, dividends can provide stability during market fluctuations. The Growth Fund of America Class A offers a notably high yield of 8.9%, adding significant income potential. For those seeking higher income, consider increasing allocations to dividend-focused funds or stocks. However, ensure that such changes align with your overall investment strategy and risk tolerance, balancing growth and income needs effectively.

Ongoing product costs Info

  • GROWTH FUND OF AMERICA CLASS A 0.61%
  • AMERICAN FUNDS FUNDAMENTAL INVESTORS CLASS A 0.60%
  • NEW PERSPECTIVE FUND CLASS A 0.73%
  • iShares Core S&P 500 ETF 0.03%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.04%
  • VANGUARD INSTITUTIONAL TOTAL STOCK MARKET INDEX FUND INSTITUTIONAL SHARES 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • VANGUARD TARGET RETIREMENT 2060 FUND INVESTOR SHARES 0.08%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is relatively low and supports long-term performance by minimizing costs. Most holdings have competitive fees, with the exception of a few funds with higher expense ratios. Reducing costs can enhance net returns over time, so consider evaluating whether lower-cost alternatives exist for higher-fee funds. This cost-conscious approach can improve the portfolio's efficiency and contribute to better long-term outcomes, aligning with best investment practices.

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