A balanced portfolio with strong US focus and sector diversification

Report created on Jan 14, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of 55% Vanguard S&P 500 ETF, 25% Vanguard Total International Stock Index Fund, 15% Vanguard Small-Cap Index Fund, and 5% Vanguard Total Bond Market Index Fund. This composition is heavily weighted towards equities, especially large-cap US stocks, which is typical for balanced portfolios seeking growth. The inclusion of international stocks and bonds adds a layer of diversification, although the bond allocation is minimal. Consider increasing bond exposure if you wish to reduce volatility further, as a more balanced allocation can help stabilize returns during market downturns.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 11.04%, indicating robust growth over time. However, it experienced a maximum drawdown of -33.86%, reflecting potential vulnerability during market downturns. While past performance is not indicative of future results, these figures suggest a growth-oriented strategy with moderate risk. To mitigate potential losses, consider incorporating more defensive assets or increasing the bond allocation, which can help cushion against significant market declines.

Projection Info

Using Monte Carlo simulations, which project future outcomes based on historical data, this portfolio has an annualized return of 8.41% across 1,000 simulations. The potential outcomes vary, with a 5th percentile return of -7.05% and a 67th percentile return of 254.05%. While simulations provide insight, they are not guarantees, as they rely on past data. To improve projection accuracy, regularly review and adjust the portfolio based on changing market conditions and personal investment goals.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%
  • Cash
    1%

The portfolio is predominantly composed of stocks (94.28%) with a small allocation to bonds (4.92%). This heavy equity weighting aligns with a growth-focused strategy but may expose the portfolio to higher volatility. Balanced portfolios often include a more substantial bond component for stability. Consider increasing the bond allocation to achieve a more balanced risk-return profile, which can help reduce volatility and provide a steadier income stream through interest payments.

Sectors Info

  • Technology
    24%
  • Financials
    14%
  • Industrials
    11%
  • Consumer Discretionary
    10%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is well-diversified, with significant exposure to technology (23.80%), financial services (14.40%), and industrials (10.83%). This diversification across sectors can help mitigate risks associated with economic shifts affecting specific industries. However, the high concentration in technology may lead to increased volatility, especially during periods of regulatory changes or interest rate hikes. Consider rebalancing sector weights periodically to maintain diversification and reduce potential sector-specific risks.

Regions Info

  • North America
    72%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America (71.50%), with limited exposure to other regions. This concentration may reduce the benefits of international diversification, potentially increasing vulnerability to US market fluctuations. To enhance geographic diversification, consider increasing exposure to underrepresented regions like Europe or Asia, which can provide growth opportunities and reduce reliance on the US economy. This adjustment can help balance regional risks and capture global market trends.

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's current asset allocation can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio. By adjusting the weights of existing assets, you can achieve a more efficient portfolio, potentially enhancing returns without increasing risk. This optimization focuses on maximizing the risk-adjusted return, not necessarily diversification. Regularly review the allocation to ensure alignment with your risk tolerance and investment objectives, and consider professional advice for precise adjustments.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.94%

The portfolio's dividend yield stands at 1.94%, with the Vanguard Total Bond Market Index Fund contributing the highest yield at 3.7%. Dividends provide a steady income stream, which can be especially valuable during periods of market volatility. While the current yield is moderate, consider reinvesting dividends to take advantage of compounding returns. Additionally, explore opportunities to increase dividend income by incorporating higher-yielding assets, which can enhance total returns over time.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, thanks to the cost-effective Vanguard ETFs. Low costs are essential for long-term investing, as they help maximize net returns by reducing the drag on performance. Maintaining a low-cost structure is a positive aspect of this portfolio. Continue to monitor and compare fees across similar investment products to ensure cost-effectiveness, which can significantly impact overall portfolio growth over the long term.

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