Balanced Diversified Portfolio with Broad Global Exposure and Low Costs Suitable for Moderate Risk Tolerance

Report created on Aug 28, 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 consists of two main ETFs, with Vanguard Total Stock Market Index Fund ETF Shares making up 60% and Vanguard Total International Stock Index Fund ETF Shares at 40%. This composition offers a balanced mix of domestic and international equities, providing broad market exposure. The combination of these ETFs covers a wide array of sectors and geographic regions, which is great for diversification. Such a portfolio is designed to capture global market growth while spreading risk across various economic sectors and regions. Maintaining this balance is crucial for achieving long-term growth and managing risk effectively.

Growth Info

Historically, the portfolio has shown a compound annual growth rate (CAGR) of 10.68%, which indicates strong performance over time. With a maximum drawdown of -34.51%, it has experienced significant downturns, reflecting market volatility. However, the ability to rebound and generate positive returns highlights its resilience. The concentrated days making up 90% of returns suggest that the portfolio benefits from market surges. This historical performance suggests a robust growth potential, but investors should be prepared for periods of market stress and volatility.

Projection Info

Using a Monte Carlo simulation, which runs numerous scenarios to predict potential future performance, the portfolio shows promising outcomes. Assuming a hypothetical initial investment, the median or 50th percentile projection is an impressive 240.99% increase. Even at the 5th percentile, there is a positive return of 4.69%. The annualized return across all simulations stands at 10.33%, indicating a strong likelihood of continued growth. This forward-looking analysis suggests that the portfolio is well-positioned for future success, though it remains subject to market fluctuations.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.27% of assets in equities. This allocation suggests a focus on capital growth, as equities tend to offer higher returns over the long term compared to other asset classes. The minimal presence of cash and other assets indicates a low level of liquidity, which may not be ideal for those seeking immediate access to funds. For investors comfortable with a higher equity exposure, this allocation supports long-term wealth accumulation. However, considering alternative asset classes could potentially enhance stability and reduce risk.

Sectors Info

  • Technology
    24%
  • Financials
    16%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio covers a wide range of sectors, with significant exposure to technology (23.66%), financial services (16.30%), and industrials (11.37%). This sectoral diversification helps mitigate risks associated with industry-specific downturns. However, the high concentration in technology could lead to increased volatility due to the sector's inherent unpredictability. Diversifying further into less represented sectors could enhance stability. Balancing sector allocations ensures that the portfolio is not overly reliant on any single industry, thus reducing potential risks and enhancing long-term growth prospects.

Regions Info

  • North America
    63%
  • Europe Developed
    16%
  • Asia Emerging
    7%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is well-diversified, with significant exposure to North America (62.83%), Europe Developed (15.65%), and Asia Emerging (6.57%). This global reach allows the portfolio to benefit from growth opportunities in various regions, reducing reliance on any single market. However, the concentration in North America could lead to regional risk exposure. Increasing allocations to underrepresented regions might improve diversification. A geographically balanced portfolio can capitalize on different economic cycles and geopolitical conditions, enhancing overall resilience and growth potential.

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.

To optimize this portfolio, investors can consider adjusting along the efficient frontier to achieve desired risk levels. Moving towards a riskier portfolio involves increasing equity exposure, while a more conservative approach may include adding bonds or other asset classes. However, given the portfolio's current strong diversification and low costs, immediate optimization may not be necessary. Instead, focus on maintaining balanced sector and geographic allocations. Regularly reviewing and rebalancing the portfolio can ensure alignment with investment goals and risk tolerance.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.98%

The portfolio offers an overall dividend yield of 1.98%, with Vanguard Total Stock Market Index Fund ETF Shares yielding 1.3% and Vanguard Total International Stock Index Fund ETF Shares at 3.0%. This provides a steady income stream, adding to total returns. While not the primary focus, dividends contribute to portfolio stability, especially during market downturns. Reinvesting dividends can enhance compound growth over time. Investors seeking income alongside growth may find this portfolio appealing. Balancing yield with growth potential ensures a comprehensive investment approach.

Ongoing product costs Info

  • 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's total expense ratio (TER) is impressively low at 0.05%, with individual fund costs at 0.03% and 0.08%. Low costs are crucial in maximizing net returns, as high fees can erode profits over time. This cost-effective structure allows investors to retain more of their gains, enhancing long-term wealth accumulation. Keeping expenses low is a key strategy in portfolio management, ensuring that the majority of returns benefit the investor. Maintaining a focus on low-cost investments is advisable for optimizing portfolio performance.

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