Balanced Diversified Portfolio with Strong Historical Performance and Moderate Risk

Report created on Nov 25, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed of two ETFs, each making up 50% of the total allocation. The Vanguard International Dividend Appreciation Index Fund ETF provides a global reach with a focus on dividend growth, while the Vanguard S&P 500 ETF offers exposure to large-cap U.S. equities. This balanced approach results in a broadly diversified portfolio with a focus on long-term growth and income. The equal weighting of these funds reflects a moderate risk profile, suitable for investors looking to benefit from both domestic and international markets.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 12.49%. Despite experiencing a maximum drawdown of -32.36%, it has shown resilience and the ability to recover. This performance suggests a strong potential for long-term growth, although it is important to remember that past performance does not guarantee future results. The portfolio's historical volatility highlights the importance of maintaining a long-term perspective and being prepared for market fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 scenarios, this portfolio has an annualized return of 13.41%. The simulation predicts a wide range of potential outcomes, with end portfolio values varying significantly. The 5th percentile shows a modest gain of 62.08%, while the 67th percentile projects a robust gain of 570.83%. This analysis underscores the uncertainty inherent in investing, but also the potential for significant growth. Investors should consider their risk tolerance and investment horizon when interpreting these results.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.87% allocated to equities and a minimal cash position. This concentration in equities aligns with a growth-oriented strategy, which can offer higher returns over the long term. However, it also increases exposure to market volatility. Investors may want to consider their comfort level with this level of equity exposure and explore options for adding other asset classes, such as bonds, to reduce risk if needed.

Sectors Info

  • Technology
    24%
  • Health Care
    16%
  • Industrials
    14%
  • Financials
    14%
  • Consumer Staples
    10%
  • Consumer Discretionary
    7%
  • Telecommunications
    5%
  • Basic Materials
    4%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation is diverse, covering a wide range of industries. The largest allocation is in technology, followed by healthcare and industrials. This broad sector exposure is beneficial for diversification, as it reduces the impact of sector-specific downturns. However, the heavy weighting in technology could increase volatility due to its cyclical nature. Investors should regularly review sector allocations to ensure they align with their risk tolerance and investment objectives.

Regions Info

  • North America
    56%
  • Europe Developed
    24%
  • Japan
    13%
  • Asia Emerging
    4%
  • Asia Developed
    2%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, which accounts for 56% of the allocation. Europe Developed and Japan also hold significant portions, providing exposure to international markets. This geographic diversification helps mitigate risks associated with any single region's economic conditions. While the portfolio is well-diversified geographically, investors should remain aware of geopolitical risks and economic factors that could impact different regions.

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 optimization chart indicates that there is room for fine-tuning to achieve an optimal risk-return balance. Investors can move along the efficient frontier to adjust their risk exposure. Shifting towards the right could increase potential returns but also risk, while moving left could create a more conservative portfolio with lower volatility. Before optimizing, investors should ensure their current allocation aligns with their risk tolerance and financial goals, as these are critical factors in determining the appropriate strategy.

Dividends Info

  • Vanguard International Dividend Appreciation Index Fund ETF Shares 2.00%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.60%

The portfolio offers a total dividend yield of 1.6%, with contributions from both ETFs. The Vanguard International Dividend Appreciation Index Fund ETF provides a higher yield of 2.0%, while the Vanguard S&P 500 ETF offers 1.2%. This yield can provide a steady income stream, which is attractive for income-focused investors. However, those seeking higher income may need to explore additional income-generating investments to complement this portfolio.

Ongoing product costs Info

  • Vanguard International Dividend Appreciation Index Fund ETF Shares 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.09%

With a total expense ratio of 0.09%, this portfolio is cost-effective, which is a significant advantage for long-term investors. Low costs help maximize returns by minimizing the drag on performance. This competitive expense ratio is a testament to the efficiency of using ETFs for broad market exposure. Investors should continue to monitor costs and consider lower-cost alternatives if available, as fees can have a substantial impact on long-term returns.

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