Balanced portfolio with strong U.S. focus and low-cost diversified ETFs

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio suits an investor with a moderate risk tolerance and a focus on long-term growth. It is ideal for those who prioritize low-cost, broad market exposure while accepting some volatility. The investor should be comfortable with a predominantly equity-based portfolio, understanding the potential for significant drawdowns during market downturns. This portfolio is well-suited for individuals seeking to build wealth over a long investment horizon, with a preference for U.S. market stability.

Positions

  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    80.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    20.00%

The portfolio is composed of two ETFs: Vanguard Total Stock Market Index Fund ETF Shares at 80% and Vanguard Total International Stock Index Fund ETF Shares at 20%. This composition results in a heavy U.S. equity focus, reflecting a broad market approach. Compared to a typical balanced portfolio, this allocation is heavily weighted towards equities, which can lead to higher volatility but also the potential for significant growth. To align more closely with a balanced benchmark, consider incorporating more fixed-income assets to reduce risk and volatility.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 12.24%. This impressive growth is above average for a balanced portfolio, highlighting strong past market conditions, particularly in U.S. equities. However, the maximum drawdown of -34.79% indicates significant risk during market downturns. While historical performance is encouraging, it's essential to remember that past results do not guarantee future performance. To mitigate potential future drawdowns, consider diversifying further across asset classes.

Projection Info

Utilizing Monte Carlo simulations, the portfolio shows a wide range of potential outcomes, with a 50th percentile end value of 257.9% and a 67th percentile of 368.0%. The simulations suggest a 10.65% annualized return, indicating favorable long-term growth prospects. However, these projections are based on historical data, which may not account for future market changes. It's crucial to maintain flexibility and adaptability in investment strategy to adjust to evolving market conditions.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%
  • Other
    0%
  • No data
    0%

The asset allocation is heavily skewed towards stocks at 99%, with a minimal cash position of 1%. This allocation provides high growth potential but also increases exposure to market volatility. Compared to a balanced benchmark, this portfolio lacks fixed-income exposure, which could provide stability during market downturns. To achieve better diversification, consider adding bonds or other fixed-income assets to the mix, which can help balance risk and return.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio's sector allocation is tech-heavy, with 28% in technology, followed by financial services at 15% and consumer cyclicals at 11%. This concentration in technology can lead to higher volatility, especially during periods of interest rate increases or tech sector downturns. While this allocation aligns with current market trends, a more balanced sector distribution could reduce risk. Consider diversifying into underrepresented sectors like utilities or real estate to achieve a more balanced sector exposure.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    0%
  • Europe Emerging
    0%

Geographically, the portfolio is heavily weighted towards North America at 81%, with limited exposure to other regions. This concentration provides stability but also increases vulnerability to U.S. market-specific risks. Compared to global benchmarks, this allocation underrepresents emerging markets, which can offer diversification benefits and growth opportunities. To achieve a more globally diversified portfolio, consider increasing exposure to international and emerging market equities.

Market capitalization Info

  • Mega-cap
    41%
  • Large-cap
    31%
  • Mid-cap
    19%
  • Small-cap
    6%
  • Micro-cap
    2%

The portfolio is predominantly invested in large-cap stocks, with 41% in mega caps and 31% in big caps. This focus on large-cap stocks offers stability and liquidity but may limit exposure to the growth potential of smaller companies. Compared to a more evenly distributed market cap allocation, this concentration might miss out on the higher growth rates often seen in small and mid-cap stocks. Consider increasing exposure to smaller-cap stocks to enhance growth potential and diversification.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.72%

The portfolio's dividend yield is 1.72%, with the Vanguard Total Stock Market Index Fund ETF Shares yielding 1.30% and the Vanguard Total International Stock Index Fund ETF Shares yielding 3.40%. While dividends provide a steady income stream, the overall yield is relatively modest. For investors seeking higher income, consider increasing exposure to dividend-focused investments or sectors known for higher yields, such as utilities or real estate.

Ongoing product costs Info

  • 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 benefits from impressively low costs, with a Total Expense Ratio (TER) of 0.04%. Low costs are a significant advantage, as they enhance long-term returns by minimizing the drag on performance. Compared to industry averages, these costs are highly competitive, allowing more of your investment to compound over time. Maintaining a focus on low-cost investments is advisable to continue reaping these benefits.

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.

The portfolio's current allocation can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. This optimization doesn't necessarily mean adding new assets but adjusting the existing allocation to achieve a more efficient mix. By fine-tuning the balance between U.S. and international equities or incorporating additional asset classes, the portfolio can potentially achieve a better risk-adjusted return, aligning with long-term investment goals.

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