Balanced Broadly Diversified Portfolio with Strong Historical Returns and Low Costs Suitable for Moderate Risk Investors

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

What type of investor this portfolio is suitable for

Balanced Investors

This portfolio is suitable for a balanced investor who seeks a mix of growth and stability. They are comfortable with moderate risk and have a long-term investment horizon. Such an investor values diversification across sectors and geographies but is willing to accept some volatility for the potential of higher returns. They appreciate low-cost investment options and are not overly reliant on dividend income. Their primary goal is capital appreciation, with an understanding of the importance of remaining invested through market cycles.

Positions

  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    60.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    30.00%
  • Vanguard Small-Cap Index Fund ETF Shares
    VB - US9229087518
    10.00%

The portfolio is composed of three Vanguard ETFs, with a heavy emphasis on stocks, making up 99.3% of the portfolio. It features the Vanguard Total Stock Market Index Fund ETF at 60%, the Vanguard Total International Stock Index Fund ETF at 30%, and the Vanguard Small-Cap Index Fund ETF at 10%. This allocation leans towards a balanced risk profile, providing a broad market exposure. The significant stock allocation suggests a focus on capital appreciation over time. Consideration of diversification within the stock allocation could enhance risk management and potential returns.

Growth Info

Historically, this portfolio has shown strong growth with a Compound Annual Growth Rate (CAGR) of 11.15%. The maximum drawdown was -35.31%, indicating exposure to market volatility. However, the portfolio's ability to recover and deliver substantial returns over time is noteworthy. The fact that 90% of returns are concentrated in just 27 days highlights the importance of staying invested to capture these gains. While past performance isn't a guarantee of future results, it provides a positive indication of the portfolio's potential in similar market conditions.

Projection Info

Using a Monte Carlo simulation with 1,000 runs, we projected potential future outcomes for a hypothetical investment. The simulation shows a wide range of possible returns, with the 5th percentile at 12.21% and the 67th percentile at 364.93%. The median outcome is a 244.03% return, reflecting the portfolio's potential for growth. The annualized return across simulations is 11.02%, consistent with historical performance. This analysis helps in understanding the range of possible outcomes and reinforces the importance of a long-term investment horizon to weather market fluctuations.

Asset classes

  • Stocks
    99%
  • Cash
    1%
  • Other
    0%
  • No data
    0%

The portfolio is heavily weighted towards stocks, with over 99% in equity investments. This concentration suggests a focus on growth and capital appreciation. While stocks offer the potential for high returns, they also come with increased volatility. Diversifying into other asset classes, such as bonds or real estate, could help reduce risk and provide more stability. However, the current allocation aligns with a balanced risk profile, suitable for those comfortable with market fluctuations in pursuit of higher returns.

Sectors

  • Technology
    24%
  • Financials
    16%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is well-diversified, with technology leading at 23.93%, followed by financial services and industrials. This spread across various sectors helps mitigate risk associated with economic downturns in any single industry. However, the portfolio is heavily tilted towards technology, which could lead to increased volatility. Rebalancing to ensure a more even distribution across sectors might enhance stability and reduce sector-specific risks. This approach can help maintain a balanced exposure to both growth and defensive sectors.

Regions

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Europe Emerging
    0%

Geographically, the portfolio is predominantly invested in North America, accounting for 71.93% of the allocation. While this provides exposure to a mature and stable market, it also limits diversification benefits from other regions. Including more international exposure could help manage geopolitical risks and capitalize on growth opportunities in emerging markets. The current allocation offers a strong foundation but could benefit from a more balanced geographic spread to enhance diversification and potential returns.

Redundant positions

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Small-Cap Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation between the Vanguard Total Stock Market Index Fund ETF and the Vanguard Small-Cap Index Fund ETF. This indicates that these assets tend to move in the same direction, reducing diversification benefits. While correlation can enhance returns in a rising market, it can also amplify losses during downturns. Adjusting the portfolio to include less correlated assets could improve risk management and provide more stable returns. This approach can help achieve a better balance between risk and reward.

Dividends

  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.81%

The portfolio's dividend yield is 1.81%, with contributions from all three ETFs. The Vanguard Total International Stock Index Fund ETF offers the highest yield at 3%, providing a steady income stream. While dividends are not the primary focus of this growth-oriented portfolio, they do add an element of stability and cash flow. Investors seeking higher income might consider increasing exposure to dividend-focused investments. However, the current yield complements the portfolio's growth objectives, balancing capital appreciation with some income generation.

Ongoing product costs

  • Vanguard Small-Cap Index Fund ETF Shares 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 a total expense ratio (TER) of 0.05%. This is achieved through the use of Vanguard ETFs, known for their cost efficiency. Lower costs mean more of the returns are kept by the investor, enhancing overall performance. Keeping expenses low is crucial for long-term growth, as high fees can erode returns over time. Maintaining this focus on cost-effective investments is recommended to optimize portfolio performance and maximize returns.

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.

To optimize the portfolio, consider the concept of the efficient frontier, which involves finding the best possible return for a given level of risk. This portfolio could be optimized by addressing the high correlation between certain assets, potentially incorporating more diverse asset classes or sectors. While its current composition offers a balanced risk-reward profile, fine-tuning the allocation could enhance returns without significantly increasing risk. This approach ensures the portfolio is well-positioned to achieve its growth objectives within the investor's risk tolerance.

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