Balanced Broadly Diversified Portfolio with High US Exposure and Low Costs for Moderate Risk Investors

Report created on Nov 12, 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 of two main ETFs: Vanguard S&P 500 ETF at 70% and Vanguard Total International Stock Index Fund ETF Shares at 30%. This mix offers a strong focus on U.S. equities with a significant international component. The allocation reflects a balanced approach, providing exposure to both domestic and global markets. This composition is typical for investors seeking a blend of stability and growth potential. To enhance diversification, consider integrating additional asset classes, such as bonds, which can provide a cushion against market volatility and improve overall risk management.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 11.63%. This indicates a strong growth trajectory over time. However, the maximum drawdown of -33.86% highlights the potential for significant short-term losses. This performance suggests a solid long-term growth potential with periods of volatility. To mitigate such drawdowns, consider diversifying further into less correlated assets. This approach can help maintain growth while reducing the impact of market downturns, aligning with long-term financial goals.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method uses random sampling to predict potential outcomes, providing a range of possible returns. The median expected return is 248.57%, with a 67th percentile return of 359.59%. These projections suggest a favorable outlook, although they come with inherent uncertainties. To improve confidence in achieving financial goals, regularly review and adjust the portfolio based on changing market conditions and personal risk tolerance, ensuring alignment with investment objectives.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted in stocks, accounting for approximately 99.49% of the allocation. This high equity concentration suggests a focus on capital appreciation, suitable for long-term growth. However, it also introduces higher volatility. Incorporating other asset classes like bonds or real estate could enhance stability and provide income diversification. By balancing growth-oriented equities with more stable investments, the portfolio can better withstand market fluctuations, offering a smoother investment journey and potentially improving risk-adjusted returns.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation is well-diversified, with significant exposure to technology (27.01%), financial services (15.22%), and healthcare (10.59%). This diversification across sectors provides a buffer against sector-specific downturns, enhancing portfolio resilience. However, the high concentration in technology could increase volatility during tech market corrections. To maintain sector balance, periodically review sector allocations and consider rebalancing if any sector becomes disproportionately large. This proactive approach ensures that the portfolio remains aligned with long-term objectives while managing sector-specific risks effectively.

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 is predominantly invested in North America (71.92%), with additional exposure to Europe and Asia. This allocation reflects a strong focus on developed markets, providing stability and growth potential. However, it may limit exposure to emerging markets, which can offer higher growth opportunities. To capture global growth, consider increasing allocations to underrepresented regions. This strategy can enhance diversification, allowing the portfolio to benefit from economic expansion in different parts of the world, while managing geopolitical and currency risks.

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 current portfolio is near the efficient frontier, indicating a good balance between risk and return. The efficient frontier represents the set of optimal portfolios offering the highest expected return for a given risk level. While the portfolio is efficient, exploring different risk levels could further optimize returns. By adjusting the risk profile, investors can tailor the portfolio to better match their risk tolerance and financial goals. This approach ensures that the portfolio remains aligned with personal preferences, maximizing the potential for achieving investment objectives.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.74%

The portfolio offers a dividend yield of 1.74%, with the Vanguard S&P 500 ETF providing 1.2% and the Vanguard Total International Stock Index Fund ETF Shares yielding 3.0%. This yield provides a modest income stream, supplementing capital appreciation. To enhance income, consider increasing exposure to dividend-focused investments. This strategy can boost cash flow, supporting financial needs without sacrificing growth potential. By balancing income and growth, the portfolio can better align with income-oriented investment objectives, providing a steady return in various market conditions.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The total expense ratio (TER) of the portfolio is 0.04%, reflecting a cost-efficient investment approach. Low costs are crucial as they directly impact net returns, allowing more capital to compound over time. Maintaining this low-cost structure is beneficial for long-term growth. To keep costs down, continue using low-cost ETFs and avoid high-fee investment products. By prioritizing cost efficiency, the portfolio can maximize returns, supporting financial goals while minimizing unnecessary expenses. This approach ensures that more of the investment's growth benefits the investor.

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