Cautious Portfolio with Balanced Asset Allocation and Low Costs but Limited Diversification

Report created on Nov 27, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio is composed of two primary ETFs: Vanguard Total Stock Market Index Fund ETF and Vanguard Total Bond Market Index Fund ETF. These cover 60% and 40% of the portfolio respectively. The focus on these two funds suggests a balanced approach between stocks and bonds, providing a mix of growth and stability. The lack of additional asset classes indicates a single-focused diversification strategy. This composition reflects a cautious investment style, aiming for moderate growth while reducing risk through bonds.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 8.91%. This indicates a solid return on investment over time, despite a maximum drawdown of -24.74%. The drawdown reflects the portfolio's vulnerability to market downturns, but the overall growth rate suggests resilience and potential for recovery. The portfolio's performance is driven by its stock allocation, which tends to deliver higher returns over the long term, while the bond component provides stability.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method uses random sampling to assess potential outcomes based on historical data. The results show a 5th percentile end value of 20.95% and a 50th percentile of 160.16%, with 977 simulations yielding positive returns. The annualized return across simulations is 7.81%, indicating that the portfolio is likely to continue delivering positive returns, albeit with some variability due to market conditions.

Asset classes Info

  • Stocks
    60%
  • Bonds
    40%
  • Cash
    1%

The portfolio's asset classes include stocks at approximately 59.87% and bonds at 39.55%, with a small cash component. This allocation strikes a balance between growth and income, with stocks providing potential for capital appreciation and bonds offering income and stability. The portfolio's cautious risk classification aligns with this asset mix, as it seeks to mitigate risk while still pursuing growth. Maintaining this balance is crucial for achieving the portfolio's objectives.

Sectors Info

  • Technology
    18%
  • Financials
    8%
  • Health Care
    7%
  • Consumer Discretionary
    6%
  • Industrials
    5%
  • Telecommunications
    5%
  • Consumer Staples
    3%
  • Energy
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Basic Materials
    1%

The sector allocation within the portfolio is diverse, with technology leading at 18.46%, followed by financial services and healthcare. This diversification across sectors helps reduce the risk associated with any single industry. However, the concentration in technology suggests a potential vulnerability to sector-specific downturns. To optimize sector allocation, consider periodically reviewing sector performance and adjusting allocations to maintain a balanced exposure across various industries.

Regions Info

  • North America
    60%

Geographically, the portfolio is heavily weighted towards North America, with minimal exposure to other regions. This concentration reflects a focus on the U.S. market, which can be beneficial given its size and stability. However, limited geographic diversification may expose the portfolio to regional risks. To enhance geographic diversification, consider gradually increasing exposure to international markets, which can provide additional growth opportunities and risk mitigation.

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's optimization chart suggests that there is room for improvement in diversification. To achieve a riskier or more conservative portfolio, consider moving along the efficient frontier. For a riskier approach, increase the stock allocation, potentially boosting returns. Conversely, for a more conservative stance, increase bond holdings to further stabilize the portfolio. Before optimizing, ensure that other areas, such as sector and geographic diversification, are addressed to maintain a well-rounded strategy.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 2.12%

The portfolio's dividend yield stands at 2.12%, with contributions from both the stock and bond ETFs. This yield provides a steady income stream, which can be reinvested to enhance long-term growth. The bond ETF's higher yield of 3.5% offers more substantial income, while the stock ETF's 1.2% yield adds growth potential. Regularly reviewing dividend yields and reinvestment strategies can help maximize the portfolio's income and growth prospects.

Ongoing product costs Info

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

With a total expense ratio (TER) of 0.03%, the portfolio benefits from extremely low costs. This cost efficiency enhances net returns, allowing more of the portfolio's gains to compound over time. Maintaining low costs is crucial for optimizing long-term performance. Continuously evaluating expense ratios and seeking cost-effective investment options can further improve the portfolio's cost structure, ensuring that expenses do not erode returns.

What next?

Ready to invest in this portfolio?

Select a broker that fits your needs and watch for low fees to maximize your returns.

Select broker

Create your own report?

Analyze your portfolio

Join our community!

Join Discord

The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.

Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.

Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.

Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.

By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.

Instrument logos provided by Elbstream.

Help us improve Insightfolio

Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey