Balanced Highly Diversified Portfolio with Strong Global Exposure and Low Costs Suitable for Moderate Risk Investors

Report created on Jun 22, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio consists of three main ETFs: Vanguard Total Stock Market Index Fund ETF (60%), Vanguard Total International Stock Index Fund ETF (30%), and Vanguard Total World Bond ETF (10%). This composition indicates a strong focus on equities with a smaller allocation to bonds, providing a balanced approach to growth and stability. The combination of domestic and international equities enhances global exposure, while the bond component helps mitigate potential volatility. This setup is well-suited for those seeking a diversified portfolio with moderate risk and growth potential.

Growth Info

With a historical Compound Annual Growth Rate (CAGR) of 11.16%, the portfolio has shown impressive performance over time. However, it's important to note the maximum drawdown of -31.43%, highlighting periods of significant declines. The fact that 90% of returns were achieved in just 16 days suggests that the portfolio's performance is driven by a few key periods. This underlines the importance of staying invested long-term to capture these crucial performance days and avoid missing out on potential gains.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was analyzed. This statistical method provides a range of possible outcomes by simulating various market scenarios. The results show a median expected return of 155.73% and an annualized return of 7.92%. While there's a 5% chance of a slight negative return, the majority of simulations indicate positive outcomes. This suggests a favorable growth trajectory, although it's essential to remain mindful of potential risks and market fluctuations.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio is primarily composed of two asset classes: stocks (89.42%) and bonds (9.86%), with a small allocation to cash and other assets. This allocation reflects a growth-oriented strategy, with equities driving potential returns. The bond component provides a buffer against market volatility, offering stability and income. While the current allocation is suitable for moderate risk tolerance, adjustments can be made to increase or decrease exposure to stocks or bonds, depending on changing financial goals or market conditions.

Sectors Info

  • Technology
    22%
  • Financials
    14%
  • Industrials
    10%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio is diversified across several sectors, with the largest allocations in technology (22.36%), financial services (14.24%), and industrials (9.86%). This sector diversification helps reduce risk by spreading investments across different industries. However, the high concentration in technology may expose the portfolio to sector-specific volatility. To maintain a balanced approach, it's important to regularly review sector allocations and ensure they align with long-term investment goals and risk tolerance.

Regions Info

  • North America
    62%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America (62.05%), with additional exposure to Europe Developed (11.80%) and Asia Emerging (4.93%). This global diversification helps mitigate regional risks and captures growth opportunities across different markets. However, the strong focus on North America could limit exposure to potential growth in other regions. Regularly reviewing and adjusting geographic allocations can help maintain a balanced global portfolio and capitalize on emerging market trends.

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.

Portfolio optimization can be explored by adjusting the allocation along the efficient frontier, balancing risk and return. For a riskier portfolio, increasing equity exposure could enhance growth potential, while a more conservative approach may involve allocating more to bonds. However, before optimizing, it's crucial to ensure alignment with financial goals and risk tolerance. Given the current balanced setup, focusing on maintaining low costs and periodic rebalancing might be more beneficial than drastic changes, especially for less experienced investors.

Dividends Info

  • Vanguard Total World Bond ETF 4.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.10%

The portfolio offers a diverse dividend yield, with the Vanguard Total World Bond ETF providing a 4.2% yield, the Vanguard Total Stock Market Index Fund ETF yielding 1.3%, and the Vanguard Total International Stock Index Fund ETF yielding 3.0%. The overall portfolio yield stands at 2.1%. This dividend income can be an attractive feature for investors seeking regular cash flow. Reinvesting dividends can further enhance long-term growth, while also providing a cushion during periods of market volatility.

Ongoing product costs Info

  • Vanguard Total World Bond ETF 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio benefits from low costs, with an overall Total Expense Ratio (TER) of 0.05%. This is achieved through the low-cost structure of the Vanguard ETFs, which range from 0.03% to 0.08%. Keeping investment costs low is crucial for maximizing returns over time, as high fees can significantly erode gains. The current cost structure is favorable and should be maintained, with regular reviews to ensure that any changes in fees or fund expenses do not negatively impact the portfolio's performance.

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