Balanced Broadly Diversified Portfolio with Strong Geographic Exposure and Low Costs for Moderate Risk Tolerance Investors

Report created on Aug 11, 2024

Risk profile Info

4/7
Balanced
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Diversification profile Info

4/5
Broadly Diversified
← Less diversification More diversification →

Positions

The portfolio consists of two ETFs: the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard Total International Stock Index Fund ETF Shares, with a 60% and 40% allocation, respectively. This composition offers broad diversification across global markets, providing exposure to a wide range of sectors and regions. The portfolio's risk classification is balanced, meaning it's designed to offer a moderate level of risk and return. This setup is ideal for investors looking for a diversified approach without venturing into high-risk territory.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 10.61%, which is quite impressive for a balanced portfolio. The maximum drawdown of -34.48% indicates the potential downside during market downturns, but the portfolio's diversified nature helps mitigate this risk. Only 26 days account for 90% of returns, highlighting the importance of staying invested during volatile market periods. This historical performance suggests that the portfolio is robust and capable of delivering steady returns over the long term.

Projection Info

A Monte Carlo simulation, which uses random sampling to model potential future returns, was conducted with 1,000 simulations. The results indicate a median (50th percentile) end portfolio value increase of 228.01% with an annualized return of 10.48%. This suggests a strong likelihood of positive returns, as 969 out of 1,000 simulations resulted in gains. The simulation provides a range of possible outcomes, helping investors understand potential risks and rewards. This forward projection reinforces the portfolio's potential for growth while maintaining a balanced risk profile.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.27% allocated to equities, and a minimal allocation to cash and other asset classes. This high equity exposure aligns with a growth-oriented strategy, aiming to capitalize on long-term market appreciation. While this can lead to higher returns, it also increases exposure to market volatility. To reduce risk, consider diversifying into other asset classes like bonds or real estate, which can provide stability during market downturns and help balance the overall risk-return profile.

Sectors Info

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

The sector allocation is well-diversified, with significant exposure to technology (23.66%), financial services (16.30%), and industrials (11.37%). This spread helps mitigate sector-specific risks and capitalize on growth opportunities across different industries. However, a heavy concentration in technology could lead to increased volatility. To enhance stability, consider rebalancing the portfolio to ensure no single sector dominates. A diversified sector allocation can help capture growth while reducing the impact of sector-specific downturns on the portfolio's overall performance.

Regions Info

  • North America
    63%
  • Europe Developed
    16%
  • Asia Emerging
    7%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The geographic composition of the portfolio is heavily weighted towards North America, with 62.83% allocation, followed by Europe Developed and Asia Emerging. This provides exposure to both established and emerging markets, offering a balance between stability and growth potential. However, the portfolio's reliance on North American markets could increase vulnerability to regional economic shifts. To improve geographic diversification, consider increasing exposure to underrepresented regions. This strategy can help mitigate regional risks and capture growth opportunities in diverse economic environments.

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 current portfolio is close to the efficient frontier, indicating it is well-optimized for the given risk level. The efficient frontier represents the set of portfolios that offer the highest expected return for a given level of risk. While the portfolio is efficient, it is not the optimal one, as the optimal portfolio has a higher expected return of 13.59% with a risk level of 18.00%. To further optimize, consider adjusting the risk level according to personal risk preferences, balancing potential returns with acceptable risk.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.98%

The portfolio offers a total dividend yield of 1.98%, with the Vanguard Total Stock Market Index Fund ETF Shares yielding 1.3% and the Vanguard Total International Stock Index Fund ETF Shares yielding 3.0%. This yield provides a modest income stream, which can be attractive for investors seeking regular cash flow. While the yield is not particularly high, it adds an element of stability to the portfolio's total return. To increase income, consider incorporating higher-yielding assets, but be mindful of the potential increase in risk.

Ongoing product costs Info

  • 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's costs are impressively low, with a total expense ratio (TER) of 0.05%, thanks to the cost-efficient nature of the Vanguard ETFs. Low costs are crucial for maximizing net returns over the long term, as high fees can significantly erode investment gains. This cost structure makes the portfolio attractive for investors seeking to minimize expenses while maintaining broad market exposure. To continue benefiting from low costs, regularly review the expense ratios of the portfolio's holdings and consider cost-effective alternatives if necessary.

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