A balanced US-focused portfolio with strong equity exposure and low costs

Report created on Jan 7, 2025

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 predominantly composed of equities, with 76% in the Vanguard Total Stock Market Index Fund and 23% in the Vanguard Total International Stock Index Fund. This structure leans heavily towards stock investments, with a small 1% allocation to real estate through an ETF. Compared to a typical balanced portfolio, which might include bonds or other fixed-income assets, this portfolio is more equity-centric. This high equity allocation can drive growth but may also introduce more volatility. Consider adding fixed-income assets to reduce risk and enhance diversification.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 12.03%. This indicates a strong growth trajectory over time, significantly above average market returns. However, the maximum drawdown of -34.69% suggests vulnerability to market downturns. Comparing this with benchmarks, the portfolio's performance is commendable, but the drawdown highlights potential risk. To mitigate such risks, consider strategies to cushion against market volatility, such as increasing diversification or using hedging techniques.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes. The 50th percentile indicates a potential growth of 180.15%, with an annualized return of 9.09%. These simulations use historical data to predict future performance, but it's essential to remember that past performance does not guarantee future results. The 5th percentile's negative return highlights possible downside risks. To prepare for varying outcomes, ensure the portfolio aligns with your risk tolerance and consider stress-testing it against different economic scenarios.

Asset classes Info

  • Stocks
    98%
  • Real Estate
    1%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 98.37% of the total allocation, with minimal exposure to real estate at 1%. This concentration in equities can drive substantial growth but may increase volatility. Compared to a balanced benchmark, which typically includes a mix of stocks, bonds, and other assets, this portfolio is less diversified across asset classes. To enhance risk management and stability, consider incorporating fixed-income assets or alternative investments to balance the equity exposure.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Real Estate
    4%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%

The portfolio's sector allocation is diverse, with significant investments in technology (26.41%), financial services (15.02%), and healthcare (10.86%). This sectoral balance aligns closely with common benchmarks, indicating a well-diversified approach within equities. However, technology-heavy portfolios may experience heightened volatility, especially during interest rate fluctuations. To maintain stability, regularly review sector allocations and adjust as necessary to respond to economic shifts or emerging opportunities in other sectors.

Regions Info

  • North America
    78%
  • Europe Developed
    9%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, accounting for 78.48% of the allocation. This focus provides stability due to the mature and robust nature of US markets but may limit exposure to growth opportunities in emerging regions. Compared to a global benchmark, there's an underrepresentation in regions like Latin America and Africa/Middle East. To enhance geographic diversification, consider increasing allocations to underrepresented regions, which may offer growth potential and reduce reliance on North American markets.

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 can be optimized using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio based on current assets. This optimization focuses on adjusting asset allocations to enhance returns for a given level of risk. While this process can improve efficiency, it may not address diversification or other investment goals. To ensure the portfolio remains aligned with your broader objectives, consider incorporating additional factors like sector and geographic diversification in your optimization strategy.

Dividends Info

  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 3.30%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.20%
  • Weighted yield (per year) 1.71%

The portfolio's dividend yield is modest at 1.71%, with the highest contribution from the Vanguard Real Estate Index Fund ETF at 3.9%. Dividends can provide a steady income stream, which is particularly beneficial in volatile markets. However, the overall yield is lower than some income-focused portfolios. If income generation is a priority, consider increasing allocations to higher-yielding assets or funds. This adjustment can enhance cash flow while maintaining growth potential through equity investments.

Ongoing product costs Info

  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 0.12%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • Weighted costs total (per year) 0.06%

The portfolio boasts impressively low costs, with a total expense ratio (TER) of 0.06%. This low-cost structure supports better long-term performance by minimizing expenses that can erode returns over time. Compared to industry averages, these costs are highly competitive, providing a solid foundation for cost-efficient investing. To maintain this advantage, continue monitoring fund fees and consider replacing any high-cost holdings with lower-cost alternatives if they align with your investment strategy and goals.

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