A balanced portfolio with strong US focus and minimal international diversification

Report created on Jan 13, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio predominantly consists of equity funds, with a substantial 93% allocation in three main funds, indicating a strong preference for stocks. This composition is typical for investors seeking capital growth, but it may lack diversification benefits that come from including other asset classes like bonds or real estate. Broadly diversified portfolios often include a mix of asset types to spread risk. To enhance diversification, consider integrating other asset classes that can offer stability during market volatility, such as bonds or real estate investments.

Growth Info

Historically, the portfolio has shown a robust compound annual growth rate (CAGR) of 12%, which is impressive and aligns well with broad market indices. However, this performance comes with a significant maximum drawdown of -34.18%, highlighting potential volatility. It's important to remember that past performance doesn't guarantee future results. To mitigate such volatility, consider strategies that balance growth with downside protection, like increasing exposure to less volatile assets, without sacrificing potential returns.

Projection Info

Forward projections using Monte Carlo simulations, which analyze potential future outcomes based on historical data, suggest an annualized return of 11.5%. While 980 out of 1,000 simulations show positive returns, it's crucial to note that these projections are not certainties. Monte Carlo simulations provide a range of possible outcomes, but they rely on historical data that may not predict future market conditions. Regularly reviewing and adjusting the portfolio can help in adapting to changing market environments and maintaining alignment with investment goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in equities, with over 99% in stocks, which limits diversification across asset classes. While equities can provide significant growth potential, they also come with higher risk. A more balanced allocation might include bonds or other fixed-income assets, which can offer stability and income during market downturns. Consider diversifying into different asset classes to reduce overall portfolio risk and to create a more resilient investment strategy that can withstand various market conditions.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Discretionary
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Consumer Discretionary
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

The portfolio's sector allocation is technology-heavy at nearly 28%, which is significantly above typical benchmark compositions. While technology has been a strong performer, this concentration may lead to higher volatility, especially if market sentiment shifts. Other sectors like financial services and healthcare are also prominent but more balanced. To reduce sector-specific risk, consider diversifying further into underrepresented sectors, which may provide more stable returns and reduce reliance on the technology sector's performance.

Regions Info

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

Geographically, the portfolio is heavily skewed towards North America, with over 80% exposure. This aligns with the home country bias common among US investors but limits exposure to international growth opportunities. Comparatively, global benchmarks often have more balanced geographic allocations. To enhance diversification, consider increasing exposure to underrepresented regions, such as emerging markets, which may offer higher growth potential and reduce dependency on the North American market.

Redundant positions Info

  • Vanguard Total World Stock Index Fund ETF Shares
    Fidelity 500 Index Fund
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among US-focused funds. High correlation means these assets tend to move in the same direction, which can limit diversification benefits during market downturns. Diversification aims to combine assets that do not move together, reducing overall portfolio risk. To improve diversification, consider including assets with lower correlation, such as international equities or bonds, which can provide a buffer against market volatility and enhance overall portfolio stability.

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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio given the current assets. However, the presence of highly correlated assets suggests that diversification could be improved first. Optimization involves adjusting the weightings of existing assets to achieve a more efficient allocation. Before optimizing, consider reducing correlations by introducing less correlated asset types, which can enhance the portfolio's risk-return profile and provide a more balanced investment strategy.

Dividends Info

  • Fidelity 500 Index Fund 1.30%
  • Vanguard Total World Stock Index Fund ETF Shares 2.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.71%

The portfolio offers a moderate dividend yield of 1.71%, which contributes to overall returns. Dividend-paying assets can provide a steady income stream, which is particularly beneficial during market downturns. This yield is relatively typical for equity-focused portfolios, but there may be opportunities to enhance income by incorporating higher-yielding assets. Consider balancing growth and income by exploring dividend-focused strategies or funds, which can provide both capital appreciation and regular income.

Ongoing product costs Info

  • Fidelity 500 Index Fund 0.02%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • 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%

Portfolio costs are impressively low, with a total expense ratio (TER) of only 0.04%. Low costs are advantageous as they maximize net returns over time, aligning with best practices for cost-effective investing. Keeping expenses minimal allows more of your investment to compound over time. Continue to monitor and manage costs, ensuring that any new investments or rebalancing efforts maintain this cost efficiency. Consider exploring additional low-cost options if adjustments to the portfolio are made.

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