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

Report created on Dec 5, 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 three ETFs, with a heavy emphasis on the Vanguard Total Stock Market Index Fund ETF Shares, making up 75% of the portfolio. This composition suggests a focus on broad exposure to the U.S. stock market. Additionally, the inclusion of the Vanguard Total International Stock Index Fund ETF Shares at 20% offers international diversification. The Fidelity® MSCI Information Technology Index ETF, though only 5%, indicates a tilt towards the technology sector. This setup provides a balanced approach, leveraging both domestic and international equities. To enhance diversification, consider exploring other asset types beyond equities.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate of 12.8%. However, it has experienced a maximum drawdown of 34.48%, highlighting its vulnerability during market downturns. The portfolio's performance is concentrated in a few days, with 90% of returns occurring over just 31 days. This indicates potential volatility. A strong historical performance suggests a solid foundation, but the significant drawdown highlights the need for risk management. To mitigate potential downturns, consider strategies like dollar-cost averaging or diversifying further into less volatile asset classes.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio shows a promising future, with an annualized return of 15.1%. The simulations indicate a 5th percentile return of 80.03% and a 67th percentile return of 727.57%. This suggests a wide range of potential outcomes, reflecting the inherent uncertainty in market predictions. Monte-Carlo simulations provide a range of possible future outcomes, helping investors understand potential risks and rewards. Given the positive projections, maintaining the current strategy could be beneficial. However, staying informed about market conditions and adjusting allocations as needed is crucial for long-term success.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.53% allocated to equities. This high concentration in a single asset class implies significant exposure to equity market risks. While stocks offer potential for high returns, they also come with increased volatility. Diversifying across multiple asset classes, such as bonds or real estate, can help reduce overall portfolio risk. Consider incorporating other asset types to achieve a more balanced risk-return profile, aligning with long-term investment goals and risk tolerance.

Sectors Info

  • Technology
    31%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio's sector allocation is diverse, with a notable 30.64% in technology, followed by financial services and healthcare. This concentration in technology suggests a growth-oriented approach, capitalizing on the sector's potential for innovation and expansion. However, it also exposes the portfolio to sector-specific risks. Diversification across sectors can help mitigate these risks. To achieve a more balanced sector allocation, consider increasing exposure to underrepresented sectors, potentially stabilizing returns during sector-specific downturns.

Regions Info

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

Geographically, the portfolio is predominantly focused on North America, with 81.16% allocation, followed by smaller allocations in Europe Developed and Asia Emerging. This concentration in North America reflects a strong belief in the region's economic prospects. While this focus may benefit from regional growth, it also increases vulnerability to local economic downturns. A more geographically diversified portfolio can help mitigate regional risks. Consider increasing allocations to other global regions, providing exposure to diverse economic environments and growth opportunities.

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, consider exploring the efficient frontier to adjust risk levels. Moving along the frontier can help achieve a more conservative or riskier portfolio, depending on investment goals. For a more conservative approach, allocate more towards low-volatility assets like bonds. For higher returns, consider increasing exposure to equities with growth potential. Given the current portfolio's strong performance and low costs, focus on enhancing diversification and reducing correlation first, which could provide more stability and resilience against market fluctuations.

Dividends Info

  • Fidelity® MSCI Information Technology Index ETF 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.51%

The portfolio's overall dividend yield is 1.51%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 2.9%. This yield provides a modest income stream, which can be beneficial for reinvestment or income purposes. While not the primary focus, dividends can play a role in total returns, especially during periods of market volatility. To enhance income potential, consider increasing exposure to dividend-paying assets, which can provide stability and additional cash flow over time.

Ongoing product costs Info

  • Fidelity® MSCI Information Technology Index ETF 0.08%
  • 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) 0.04%

The portfolio's total expense ratio is impressively low at 0.04%, indicating cost-efficient management. Low costs are crucial for maximizing net returns, as they minimize the drag on performance. The Vanguard Total Stock Market Index Fund ETF Shares, with an expense ratio of 0.03%, contributes significantly to this efficiency. Keeping costs low is a key component of successful investing. Continuously monitor expense ratios and consider reallocating to lower-cost options if available, ensuring that investment returns are not eroded by fees.

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