A balanced portfolio with strong US equity focus and moderate international diversification

Report created on Dec 20, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed primarily of ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 40%. This is complemented by the Vanguard Total International Stock Index Fund ETF at 30%, Schwab U.S. Dividend Equity ETF at 15%, and Vanguard Extended Market Index Fund ETF at 15%. This composition suggests a strong focus on US equities, with a moderate international exposure to diversify risk. Compared to common benchmarks, this allocation leans heavily towards the US market, which can be beneficial for capturing growth from large-cap US companies. However, consider diversifying further to include other asset classes like bonds to balance risk and return.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 10.87%, indicating robust performance. This growth rate suggests that the portfolio has effectively captured market gains, particularly from US equities. However, it has also experienced a maximum drawdown of -34.78%, highlighting its vulnerability during market downturns. While past performance is not indicative of future results, this information is useful for understanding how the portfolio might react in volatile conditions. To mitigate potential drawdowns, consider incorporating more defensive assets or hedging strategies.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests an annualized return of 11.37% with a positive return in 966 out of 1,000 simulations. This indicates a high probability of positive outcomes, although it is important to remember that simulations cannot predict future market conditions with certainty. The projected returns highlight the potential for growth, but also the inherent risks. To align with your risk tolerance, regularly review and adjust the portfolio based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising nearly 99% of the total allocation. This high concentration in equities can drive significant returns during bull markets but also increases exposure to market volatility. Compared to a balanced benchmark, this portfolio lacks diversification into fixed income or alternative assets that could provide stability during downturns. Consider incorporating bonds or real assets to reduce overall risk and smooth returns over time, especially if nearing retirement or requiring more predictable income streams.

Sectors Info

  • Technology
    22%
  • Financials
    17%
  • Industrials
    12%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Consumer Staples
    7%
  • Telecommunications
    7%
  • Energy
    5%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    2%

Sector-wise, the portfolio is diversified across 11 sectors, with significant weightings in technology at 21.7%, financial services at 17%, and industrials at 11.7%. This sectoral distribution aligns closely with major equity indices, indicating a well-diversified approach. However, the high allocation to technology could lead to increased volatility, especially during periods of regulatory scrutiny or interest rate hikes. To manage sector risk, periodically reassess sector weights and consider rebalancing if any single sector becomes overly dominant relative to your risk tolerance.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio has a strong bias towards North America, accounting for 71.8% of the allocation. While this reflects the portfolio's focus on US equities, it limits exposure to emerging markets and other regions that could offer growth opportunities. Compared to global benchmarks, this geographic concentration might miss out on diversification benefits. To enhance geographic diversification, consider increasing allocations to emerging markets or other underrepresented regions, which can provide growth potential and reduce reliance on the US market.

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 allocation may not sit on the Efficient Frontier, which represents the best possible risk-return ratio for a given set of assets. By optimizing the portfolio, you could potentially achieve a better balance between risk and return. This involves adjusting the allocation among existing assets to improve efficiency without necessarily increasing diversification. Regularly review the portfolio's performance and consider optimization strategies to ensure it aligns with your risk tolerance and return objectives while maximizing efficiency.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Extended Market Index Fund ETF Shares 1.10%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.72%

The portfolio's average dividend yield is 1.72%, with the Schwab U.S. Dividend Equity ETF contributing the highest yield at 3.7%. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. This yield is relatively modest compared to high-dividend strategies but aligns with a focus on growth and capital appreciation. If income generation is a priority, consider increasing exposure to dividend-focused assets or funds, while balancing the need for growth and capital preservation.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Extended Market Index Fund ETF Shares 0.06%
  • 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%, with individual fund fees ranging from 0.03% to 0.08%. Low costs are a significant advantage, as they enhance long-term returns by reducing the drag on performance. This cost efficiency aligns well with best practices for portfolio management, ensuring more of your investment dollars are working for you. Continue to monitor fund fees and explore opportunities to reduce costs further, such as switching to lower-cost funds or negotiating fees with your financial advisor.

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