Balanced Portfolio with Moderate Diversification and High Historical Performance

Report created on Sep 1, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists of five different ETFs, with the Vanguard Total Stock Market Index Fund ETF Shares holding the largest share at 40%. The remaining funds are spread across U.S. small cap value, U.S. dividend equity, international small cap value, and international equity ETFs. This mix provides a balanced approach, focusing heavily on U.S. equities while incorporating some international exposure. This composition allows for a diversified yet concentrated investment strategy, which is generally suitable for investors looking for moderate risk and steady growth. To enhance diversification, consider adding more asset classes.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 19.94%. This indicates strong growth over time, although it experienced a maximum drawdown of -22.09%, reflecting periods of decline. The concentrated days that make up 90% of returns suggest that a few days significantly impacted overall performance. This performance history demonstrates the potential for high returns, albeit with some volatility. It's essential to be prepared for fluctuations and ensure your investment horizon aligns with this level of risk. Consider strategies to smoothen returns over time.

Projection Info

Using a Monte Carlo simulation with a hypothetical initial investment, the portfolio's future performance was projected. This analysis ran 1,000 simulations to estimate potential outcomes. The results suggest a wide range of possibilities, with the 5th percentile yielding 239.21% and the 67th percentile reaching 1,590.04%. The annualized return across simulations is 21.07%, indicating a favorable outlook. Monte Carlo simulations provide a probabilistic view of future returns, highlighting the importance of diversification and risk management. To optimize potential outcomes, consider adjusting portfolio allocations.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily skewed towards stocks, with 99.71% in equities and minimal allocations in cash, bonds, and other asset classes. This concentration in equities can lead to higher returns but also increases exposure to market volatility. A more balanced allocation across different asset classes can mitigate risk and provide stability during market downturns. Consider incorporating bonds or other fixed-income securities to diversify risk and enhance portfolio resilience. This can help maintain a balanced risk-reward profile, aligning with long-term investment goals.

Sectors Info

  • Financials
    19%
  • Technology
    17%
  • Industrials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Energy
    8%
  • Consumer Staples
    7%
  • Telecommunications
    5%
  • Basic Materials
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is diverse, with significant investments in financial services, technology, and industrials. These sectors account for the majority of the portfolio, offering exposure to a variety of economic drivers. While this diversification can capture growth across different industries, it may also introduce sector-specific risks. A more even distribution among sectors could enhance stability and reduce vulnerability to sector downturns. Regularly review sector allocations to ensure alignment with market conditions and personal risk tolerance, and adjust as necessary to maintain balance.

Regions Info

  • North America
    82%
  • Europe Developed
    10%
  • Japan
    5%
  • Australasia
    2%
  • Asia Developed
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is primarily focused on North America, with over 81% of assets in this region. While this provides exposure to a robust and mature market, it limits diversification benefits from other global regions. International investments in Europe, Japan, and Australasia offer some diversification, but the overall exposure remains limited. Expanding geographic allocation can mitigate regional risks and capitalize on growth opportunities in emerging markets. Consider gradually increasing exposure to diverse regions to achieve a more globally diversified portfolio.

Redundant positions Info

  • Avantis® International Small Cap Value ETF
    BNY Mellon International Equity ETF
    High correlation

There is a notable correlation between the Avantis International Small Cap Value ETF and the BNY Mellon International Equity ETF. Such correlations can reduce diversification benefits, as these assets may move in tandem during market shifts. Identifying and minimizing highly correlated assets can enhance diversification and reduce portfolio risk. Consider replacing or reducing allocations in correlated assets to achieve a more balanced risk profile. This can improve the portfolio's ability to withstand market volatility and enhance overall 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.

Before optimizing, consider addressing the high correlation between certain assets, which may limit diversification benefits. Once resolved, you can optimize along the efficient frontier to adjust risk levels. Moving towards a riskier portfolio involves increasing equity exposure, while a conservative approach would involve incorporating more bonds or fixed-income assets. The current asset allocation offers a balanced risk-reward profile, but further diversification across asset classes and regions can enhance resilience. Regular reviews and adjustments can help maintain alignment with financial goals and risk tolerance.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • BNY Mellon International Equity ETF 2.90%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 2.10%

The portfolio offers a total dividend yield of 2.1%, with the Schwab U.S. Dividend Equity ETF and Avantis International Small Cap Value ETF providing the highest yields. Dividends can provide a steady income stream, enhancing total returns and offering some protection during market downturns. While the current yield is moderate, focusing on dividend-paying assets can contribute to a more stable income flow. Consider maintaining a balance between growth and dividend-focused investments to optimize income and capital appreciation.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • BNY Mellon International Equity ETF 0.04%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.11%

The total expense ratio (TER) of the portfolio is 0.11%, which is relatively low and indicates cost-efficient management. Lower costs can significantly impact net returns over time, enhancing portfolio performance. Each ETF within the portfolio has varying expense ratios, with the Vanguard Total Stock Market Index Fund ETF Shares offering the lowest at 0.03%. To maintain cost efficiency, regularly review and compare fund expenses. Consider reallocating to lower-cost alternatives if necessary, to ensure that costs do not erode potential returns.

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