Balanced portfolio with strong US focus and moderate international exposure

Report created on Jan 8, 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 ETFs, with a significant 60% allocation to the Vanguard S&P 500 ETF. This indicates a strong bias towards large-cap US equities, which are often seen as stable and reliable. The inclusion of 20% in the Avantis U.S. Small Cap Value ETF adds exposure to smaller, potentially higher-growth companies. The remaining 20% is split between gold and international stocks, providing some diversification. Compared to common benchmarks, this portfolio leans heavily towards US equities, which could limit exposure to global growth opportunities. Consider increasing international allocation for broader diversification.

Growth Info

The portfolio has demonstrated a solid historical performance with a Compound Annual Growth Rate (CAGR) of 10.84%. This is a strong return, reflecting the robust performance of US equities in recent years. However, the maximum drawdown of -21.94% highlights the potential volatility and risk during market downturns. While past performance can provide insights, it is not a guarantee of future results. To mitigate risk, consider strategies that focus on downside protection, such as diversifying into less correlated assets.

Projection Info

Using Monte Carlo simulations, which analyze potential future outcomes based on historical data, the portfolio shows a 50th percentile projection of 212.31% growth. This suggests a favorable outlook, but it's important to note that these projections are based on past data and assumptions. The simulations reveal a wide range of possible outcomes, emphasizing the uncertainty inherent in investing. To prepare for various scenarios, maintaining a diversified portfolio and regularly reviewing asset allocations is recommended.

Asset classes Info

  • Stocks
    90%

The portfolio is heavily weighted towards stocks, making up nearly 90% of the asset allocation. While this aligns with a growth-focused strategy, it also increases exposure to equity market volatility. The inclusion of gold provides some hedge against economic instability, but its 10% allocation may limit its impact. Compared to typical balanced portfolios, which often include bonds for stability, this portfolio's lack of fixed income could be a concern. Consider introducing bonds to enhance stability and reduce overall portfolio risk.

Sectors Info

  • Technology
    22%
  • Financials
    16%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Health Care
    8%
  • Telecommunications
    6%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation shows a significant concentration in technology and financial services, with 22.43% and 15.61%, respectively. This reflects the broader market's trends, as these sectors have driven much of the recent growth. However, this concentration could lead to increased volatility, especially if these sectors face downturns. Balancing sector exposure can help mitigate risk. Consider diversifying into more defensive sectors like consumer staples or utilities, which tend to perform better in economic downturns.

Regions Info

  • North America
    80%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

The portfolio's geographic allocation is heavily skewed towards North America, with 80% exposure. This aligns with the portfolio's US-focused strategy but limits diversification benefits from other regions. Exposure to Europe, Asia, and other regions is minimal, which may miss out on growth opportunities in emerging markets. A more globally diversified portfolio could benefit from different economic cycles and reduce region-specific risks. Consider increasing exposure to underrepresented regions to enhance geographic diversification.

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 could be optimized for a better risk-return ratio using the Efficient Frontier concept, which identifies the best possible balance between risk and return. Currently, an optimized portfolio with the same risk level offers an expected return of 12.25%, higher than the current portfolio's expected return. This optimization involves reallocating existing assets rather than adding new ones. Regularly rebalancing the portfolio to align with the Efficient Frontier can help achieve optimal performance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.37%

The portfolio's dividend yield stands at 1.37%, which is relatively modest. This reflects the focus on growth-oriented US equities, which typically offer lower dividends. For investors seeking income, this might not be sufficient. The Vanguard Total International Stock Index Fund ETF Shares contributes the highest yield at 3.3%, providing some income diversification. To enhance income potential, consider increasing allocations to higher-yielding assets, such as dividend-focused ETFs or REITs.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares® Gold Trust Micro 0.09%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio boasts a low Total Expense Ratio (TER) of 0.08%, which is commendable. Low costs are crucial for long-term investment success as they minimize the drag on returns. The Vanguard S&P 500 ETF, with a TER of 0.03%, exemplifies cost efficiency. While the Avantis U.S. Small Cap Value ETF has a higher fee, its potential for higher returns may justify the cost. Regularly reviewing and comparing fees across similar products can help maintain cost efficiency.

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