A broadly diversified portfolio with a balanced risk profile and high geographic concentration

Report created on Jan 13, 2025

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 primarily of equity ETFs, with significant allocations to real estate and utilities. The largest holdings are in the Vanguard Real Estate Index Fund and Vanguard Total Stock Market Index Fund, each comprising over 23% of the portfolio. This composition suggests a focus on both growth and income through real estate and utilities exposure. Compared to a typical balanced portfolio, which might have a more even split between equities and bonds, this portfolio is more equity-heavy. Diversification across multiple sectors and asset classes helps reduce risk, but the high equity allocation may increase volatility.

Growth Info

Historically, this portfolio has achieved a compound annual growth rate (CAGR) of 9.76%, which is quite robust. However, it experienced a maximum drawdown of -34.19%, indicating potential vulnerability during market downturns. Compared to benchmarks, this performance suggests a strong growth potential but with notable risk. Understanding past performance helps set expectations, but it's important to remember that historical returns do not guarantee future results. To potentially mitigate risks, consider adding more defensive asset classes, like bonds, to balance the portfolio.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, show a wide range of potential returns for this portfolio. The median simulation projects a 156.79% return, while the 5th percentile suggests a possible loss of 6.05%. While these projections offer a glimpse into possible future scenarios, they rely on past data and can't predict exact outcomes. This portfolio's high variance highlights the importance of maintaining a diversified strategy to manage risks. Regularly reviewing and adjusting allocations based on changing market conditions could help optimize future performance.

Asset classes Info

  • Stocks
    68%
  • Real Estate
    24%
  • Bonds
    8%
  • Cash
    1%

The portfolio's asset class distribution leans heavily towards stocks, making up over 68% of the total allocation. Real estate also holds a significant portion at 23.5%, with bonds making up the remaining 7.8%. This allocation suggests a preference for growth-oriented investments, which can lead to higher returns but also increased risk. Compared to a balanced benchmark, which might include more bonds for stability, this portfolio could benefit from a slight increase in fixed-income exposure. Diversifying across more asset classes can help reduce volatility and provide more consistent returns.

Sectors Info

  • Real Estate
    25%
  • Technology
    18%
  • Utilities
    15%
  • Financials
    7%
  • Consumer Discretionary
    7%
  • Telecommunications
    5%
  • Health Care
    5%
  • Industrials
    4%
  • Consumer Staples
    2%
  • Basic Materials
    2%
  • Energy
    2%

Sector allocation is diversified, with notable concentrations in real estate, technology, and utilities. The real estate sector alone comprises nearly 25% of the portfolio, which can provide stable income through dividends but may also be sensitive to interest rate changes. Technology, at 17.8%, offers growth potential but can be volatile. This sectoral balance is generally positive but could be further optimized by ensuring no single sector dominates excessively. Monitoring sector trends and adjusting allocations accordingly can help manage risk and capitalize on growth opportunities.

Regions Info

  • North America
    78%
  • Asia Emerging
    5%
  • Europe Developed
    3%
  • Asia Developed
    2%
  • Japan
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily concentrated in North America, with 78.2% exposure. This concentration may limit diversification benefits and increase vulnerability to regional economic shifts. The remaining exposure is spread across emerging markets and developed regions, albeit in smaller proportions. While a focus on North America aligns with strong economic fundamentals, increasing exposure to international markets could enhance diversification. Consider gradually increasing allocations to underrepresented regions to reduce geographic risk and capture global growth opportunities.

Redundant positions Info

  • Vanguard Growth Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets, particularly between the Vanguard Growth Index Fund and Vanguard Total Stock Market Index Fund. High correlation means these assets tend to move in tandem, which can limit diversification benefits and increase overall risk during market downturns. To enhance diversification, consider replacing some of these correlated assets with others that have lower correlation, which can help smooth out returns and reduce risk. This adjustment could improve the portfolio's resilience in varying market conditions.

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.

While the portfolio is well-structured, it could benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. This involves adjusting allocations among existing assets to potentially enhance returns without increasing risk. It's important to note that this optimization focuses on improving the risk-return balance and may not address other goals like diversification. Regularly revisiting the asset mix and using this approach can help ensure the portfolio remains aligned with your financial objectives.

Dividends Info

  • iShares J.P. Morgan USD Emerging Markets Bond ETF 4.70%
  • iShares iBoxx $ Investment Grade Corporate Bond ETF 4.50%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard Real Estate Index Fund ETF Shares 4.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.30%
  • Utilities Select Sector SPDR® Fund 3.00%
  • Weighted yield (per year) 2.52%

The portfolio has a total dividend yield of 2.52%, with notable contributions from the real estate and utilities sectors. Dividends provide a steady income stream, which can be particularly appealing in volatile markets. This yield aligns well with the portfolio's balanced risk profile, offering both growth and income potential. For investors seeking higher income, consider increasing allocations to higher-yielding assets. However, it's important to balance yield with growth potential to ensure the portfolio remains well-positioned for long-term success.

Ongoing product costs Info

  • iShares J.P. Morgan USD Emerging Markets Bond ETF 0.39%
  • iShares iBoxx $ Investment Grade Corporate Bond ETF 0.14%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Utilities Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, which supports better long-term performance by minimizing costs. Lower fees mean more of your returns stay in your pocket, enhancing compounding effects over time. This cost efficiency is a strong advantage and aligns well with best practices in portfolio management. To maintain this benefit, regularly review and compare the fees of held assets. If possible, consider replacing higher-cost funds with similarly performing lower-cost options to further optimize returns.

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