A balanced portfolio with strong diversification and a focus on North American equities

Report created on Feb 3, 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 composed of three Vanguard ETFs, with a significant 60% allocation to the Total Stock Market Index Fund, 30% to the International Stock Index Fund, and 10% to the High Dividend Yield Index Fund. This structure reflects a balanced approach, favoring domestic equities while maintaining a substantial international presence. Compared to a typical benchmark, this portfolio leans heavily towards U.S. equities. This allocation suggests a preference for stability and growth potential within the U.S. market, while still capturing global opportunities. Consider reviewing the balance between domestic and international exposure to ensure alignment with long-term goals.

Growth Info

Historically, the portfolio has delivered an impressive Compound Annual Growth Rate (CAGR) of 11.23%, outperforming many traditional benchmarks. However, it has also experienced a maximum drawdown of -34.59%, indicating vulnerability during market downturns. This performance suggests that while the portfolio has the potential for strong returns, it also carries notable risk. The concentration in U.S. equities may have contributed to this volatility. To mitigate future risks, consider introducing more defensive assets or increasing diversification across different markets.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, show a wide range of potential results for this portfolio. With 1,000 simulations, the portfolio's median return is around 266.2%, with 965 simulations showing positive returns. This suggests a high likelihood of positive performance, but with significant variability. It's important to note that simulations rely on past data and can't predict future events with certainty. Regularly revisiting asset allocation and adjusting for changing market conditions can help manage this uncertainty.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 99% of the total allocation, with a minimal 1% in cash. This concentration indicates a strong growth orientation, suitable for investors comfortable with equity market volatility. Compared to a balanced benchmark, this portfolio lacks fixed-income or alternative asset classes, which could provide stability during market fluctuations. Introducing a small allocation to bonds or other less volatile assets could enhance diversification and reduce risk, aligning the portfolio more closely with a balanced investment strategy.

Sectors Info

  • Technology
    25%
  • Financials
    17%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

Sector-wise, the portfolio shows a significant tilt towards Technology (25%) and Financial Services (17%). This allocation aligns with current market trends, as these sectors have been major growth drivers. However, such concentration could lead to higher volatility, especially if these sectors face downturns. The portfolio's sector distribution is broadly diversified, covering 11 sectors, but the heavy tech weighting could expose it to sector-specific risks. To mitigate this, consider rebalancing towards underrepresented sectors like Utilities or Real Estate for more stability.

Regions Info

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

Geographically, the portfolio is predominantly focused on North America, with 72% exposure, followed by Europe and Asia. This allocation reflects a bias towards developed markets, which typically offer stability and growth. However, emerging markets are underrepresented, potentially limiting growth opportunities. Compared to global benchmarks, this portfolio is less diversified geographically. Expanding exposure to emerging markets could enhance diversification and capture higher growth potential, albeit with increased risk. Assessing the balance between developed and emerging markets can optimize geographic diversification.

Market capitalization Info

  • Mega-cap
    39%
  • Large-cap
    33%
  • Mid-cap
    19%
  • Small-cap
    6%
  • Micro-cap
    2%

The portfolio's market capitalization is skewed towards larger companies, with 39% in Mega caps and 33% in Big caps. This focus on large-cap stocks provides stability and lower volatility, as these companies are often industry leaders with established revenue streams. However, smaller-cap stocks, which make up only 8% of the portfolio, can offer higher growth potential. Compared to a more evenly distributed benchmark, this portfolio may miss out on opportunities from smaller, high-growth companies. Consider increasing exposure to mid and small-cap stocks to balance risk 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.

The portfolio's current allocation can be optimized using the Efficient Frontier, which balances risk and return by adjusting asset weights. This approach focuses on achieving the best possible risk-return ratio, ensuring that the portfolio is neither too risky nor too conservative. While the portfolio is well-diversified, slight adjustments in asset allocation could further enhance efficiency. Regularly reviewing and rebalancing the portfolio to align with the Efficient Frontier ensures that it remains optimized for current market conditions and investment goals.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.20%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 1.94%

The portfolio's dividend yield is 1.94%, with the highest contribution from the International Stock Index Fund at 3.20%. Dividends provide a steady income stream and can enhance total returns, especially during periods of market volatility. This yield is moderate, reflecting a balance between growth and income. For investors seeking higher income, increasing the allocation to dividend-focused equities could be beneficial. However, this may involve trade-offs with growth potential. Regularly reviewing dividend policies and yields ensures alignment with income goals.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.05%

The portfolio boasts impressively low costs, with a Total Expense Ratio (TER) of 0.05%. This is a significant advantage, as lower costs contribute to better long-term performance by minimizing the drag on returns. Vanguard's reputation for cost efficiency is evident here, supporting the portfolio's growth potential. Compared to industry averages, these costs are exceptionally low, aligning with best practices for cost management. Maintaining vigilance on fees and expenses ensures that the portfolio continues to maximize returns over time.

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