A balanced portfolio with a focus on US equities and moderate risk exposure

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is primarily composed of equity ETFs, with a significant 60% allocation to the Vanguard Total Stock Market Index Fund ETF. This is complemented by smaller allocations to bond ETFs and other equity-focused funds, such as the Vanguard S&P 500 ETF and the Vanguard Information Technology Index Fund ETF. Compared to typical benchmarks, the portfolio leans heavily towards equities, which can enhance growth potential but may increase volatility. Balancing this with a 10% bond allocation helps stabilize returns. To align with a balanced profile, consider diversifying further by increasing exposure to bonds or other asset classes.

Growth Info

Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 12.32%. This reflects strong growth over time, though it's important to note that past performance does not guarantee future results. The maximum drawdown of -32.82% indicates potential volatility during market downturns. Comparing this to typical balanced portfolios, the performance is robust, yet the drawdown suggests a need for caution. To mitigate risk, consider strategies to reduce drawdowns, such as increasing bond exposure or incorporating alternative assets.

Projection Info

Using Monte Carlo simulations, which forecast potential outcomes based on historical data, the portfolio shows promising forward projections. With 1,000 simulations, the median outcome suggests a 334.12% increase in portfolio value. However, the 5th percentile projects a 33.5% increase, highlighting possible downside risk. While simulations provide a range of outcomes, they rely on historical data and assumptions that may not hold in the future. To better prepare, consider stress-testing the portfolio under various economic scenarios to understand potential impacts.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising approximately 89.5%, with bonds making up around 9.8%. This allocation suggests a focus on growth, typical for investors with a higher risk tolerance. Compared to balanced benchmarks, the portfolio could benefit from greater diversification across asset classes. Introducing more fixed income or alternative investments could reduce volatility and enhance stability. Consider rebalancing periodically to maintain desired asset class weights, especially if market conditions shift.

Sectors Info

  • Technology
    29%
  • Financials
    12%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Basic Materials
    2%
  • Utilities
    2%

Sector-wise, the portfolio has a notable concentration in technology at 29.24%, followed by financial services and healthcare. This concentration aligns with current market trends but may increase exposure to sector-specific risks, such as regulatory changes or technological disruptions. Compared to benchmarks, the portfolio is tech-heavy, which can lead to higher volatility. To mitigate this risk, consider diversifying sector exposure by increasing allocations to underrepresented areas like consumer defensive or utilities.

Regions Info

  • North America
    84%
  • Asia Emerging
    3%
  • Asia Developed
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly North America-focused, with 84.44% of assets in this region. This concentration may limit exposure to global growth opportunities and increase vulnerability to regional economic downturns. Compared to global benchmarks, the portfolio could benefit from greater international diversification. Consider increasing allocations to emerging markets or developed regions outside North America to capture broader economic growth and reduce geographic risk.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, which can limit diversification benefits during market downturns. To improve diversification, consider replacing one of these funds with a less correlated asset. This strategy can enhance risk management and potentially improve overall portfolio performance.

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 potentially be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. This involves adjusting asset weights to achieve maximum returns for a given level of risk. However, optimization is limited to current assets and does not account for broader diversification goals. Before optimizing, address any overlapping assets that do not contribute to diversification. This approach ensures the portfolio remains aligned with both risk tolerance and investment goals.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Vanguard Extended Market Index Fund ETF Shares 1.10%
  • Weighted yield (per year) 1.62%

The portfolio's dividend yield stands at 1.62%, contributing to overall returns through income generation. With significant allocations to dividend-focused ETFs like the Schwab U.S. Dividend Equity ETF, the portfolio balances growth with income. For investors seeking steady cash flow, dividends play a crucial role. However, focusing solely on dividend yield can overlook growth opportunities. Consider balancing between high-yield and growth-oriented assets to optimize returns.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Vanguard Extended Market Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, indicating cost efficiency. Lower costs contribute to better long-term performance by minimizing the drag on returns. Compared to typical portfolio costs, this allocation aligns well with best practices. Maintaining low costs should remain a priority, but also consider the potential benefits of slightly higher-cost funds that offer unique diversification or performance benefits. Regularly review fund expenses to ensure continued cost-effectiveness.

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