Broadly Diversified Balanced Portfolio with Strong Historical Performance and Low Costs

Report created on Nov 29, 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 four ETFs, with a significant 60% allocation to the Vanguard S&P 500 ETF. This allocation provides a solid foundation in large-cap U.S. stocks, complemented by a 20% stake in international equities through the Vanguard Total International Stock Index Fund ETF. The remaining 20% is split between the Avantis U.S. Small Cap Value ETF and the Invesco NASDAQ 100 ETF, adding exposure to small-cap value and tech-heavy growth stocks. This composition reflects a balanced approach, offering broad diversification across market capitalizations and geographies, which is crucial for managing risk and capturing growth opportunities.

Growth Info

Historically, the portfolio has delivered impressive returns with a compound annual growth rate (CAGR) of 15.12%. This strong performance is noteworthy, given the market's volatility, evidenced by a maximum drawdown of -24.93%. The fact that just 21 days account for 90% of returns highlights the importance of staying invested to capture these pivotal moments. This performance indicates a robust growth trajectory, but it's essential to remain aware of the portfolio's volatility and be prepared for potential downturns. Maintaining a long-term perspective will help in navigating the ups and downs of the market.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method models potential outcomes based on historical data, providing a range of possible returns. The results show a 5th percentile outcome with a 113.46% return and a median 50th percentile return of 648.1%. Impressively, 999 simulations resulted in positive returns, with an annualized return of 17.18%. While these projections are optimistic, they underscore the importance of understanding that past performance is not indicative of future results and that market conditions can change.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.63% of assets in equities. This high equity exposure aligns with a growth-oriented strategy, aiming for capital appreciation over time. The minimal allocation to cash and other asset classes suggests a focus on maximizing returns through stock market participation. While this approach can yield substantial growth, it also introduces higher volatility. To mitigate risk, consider incorporating bonds or other fixed-income securities, which can provide stability and income, especially during market downturns.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation within the portfolio is diverse, with significant exposure to technology (28.15%), financial services (14.84%), and consumer cyclicals (11.29%). This distribution reflects a strong emphasis on growth sectors, particularly technology, which has driven much of the market's recent gains. However, over-reliance on specific sectors can increase risk if those sectors underperform. Diversifying further across different industries can help balance the portfolio, reducing the impact of sector-specific downturns and providing more consistent returns.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, accounting for 80.74% of the allocation. This heavy concentration in U.S. equities provides stability and growth potential from a mature market. However, it also limits exposure to emerging markets and other international opportunities. While the portfolio does include some allocation to Europe and Asia, increasing exposure to these regions could enhance diversification and capture growth from developing economies. Balancing geographic exposure can help mitigate risks associated with regional economic fluctuations.

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 suggests the current allocation is efficient, but there's room for improvement. To achieve a riskier portfolio, consider increasing exposure to high-growth stocks or sectors. Conversely, for a more conservative approach, add bonds or other fixed-income securities to reduce volatility and provide stability. Moving along the efficient frontier can help align the portfolio with specific risk preferences and financial goals. Before making changes, ensure any adjustments are consistent with the overall investment strategy and risk tolerance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.53%

The portfolio offers a modest total dividend yield of 1.53%, with the Vanguard Total International Stock Index Fund ETF contributing the highest yield at 3.0%. Dividends provide a steady income stream, which can be reinvested to compound growth or withdrawn for cash flow. While the yield is not particularly high, it complements the portfolio's growth focus. To boost income, consider increasing allocation to dividend-paying stocks or funds. This can provide additional income stability, especially in volatile markets or during retirement.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The portfolio is cost-effective, with a total expense ratio (TER) of 0.07%. This low-cost structure is advantageous, as it means more of the portfolio's returns are retained by the investor. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, contributes significantly to keeping costs down. While costs are already low, continue to monitor expense ratios and seek opportunities to reduce them further. Minimizing costs is a crucial component of maximizing long-term returns, as even small differences in fees can compound significantly over time.

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