A balanced and broadly diversified portfolio with a focus on US equities

Report created on Feb 2, 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 two ETFs: Vanguard Total Stock Market Index Fund (65%) and Vanguard Total International Stock Index Fund (35%). This composition provides broad exposure to both domestic and international equities. Compared to a typical balanced benchmark, this portfolio leans heavily towards equities, with minimal cash holdings. This structure is suitable for investors seeking broad market exposure with a focus on growth. Consider diversifying further by including other asset classes like bonds to reduce volatility.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 11.15%. This indicates strong growth over time, outperforming many traditional benchmarks. However, the portfolio experienced a maximum drawdown of -34.52%, reflecting significant volatility during market downturns. While past performance is promising, it's important to remember that historical data does not guarantee future results. To mitigate potential losses, consider strategies such as increasing exposure to less volatile asset classes.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The median outcome suggests a potential growth of 244.8%, while the best-case scenario could reach 376.6%. However, the 5th percentile outcome is just 16.8%, highlighting the uncertainty in projections. While Monte Carlo simulations provide valuable insights, they rely on historical data and assumptions that may not hold in the future. Diversifying assets and reassessing risk tolerance can help manage potential outcomes.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards equities, with 99% in stocks and just 1% in cash. This allocation aligns with a growth-focused strategy but may expose the portfolio to higher volatility. Compared to typical balanced portfolios, which often include bonds, this allocation is more aggressive. Diversification across asset classes can help mitigate risks and improve stability. Consider including fixed-income securities to balance the growth potential with risk management.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is led by technology at 25%, followed by financial services and consumer cyclicals. This sectoral composition is well-aligned with global market trends, though it may introduce volatility, especially in tech-heavy environments. Compared to benchmarks, the portfolio shows a balanced sector distribution. However, consider the potential impact of sector-specific risks, such as regulatory changes or economic shifts. Regularly review sector performance to maintain alignment with market conditions.

Regions Info

  • North America
    68%
  • Europe Developed
    13%
  • Asia Emerging
    6%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is dominated by North American equities (68%), with notable allocations in Europe and Asia. This provides a diversified exposure but leans heavily on the US market. Compared to global benchmarks, this allocation is typical but may benefit from increased exposure to emerging markets for enhanced diversification. Consider the implications of geopolitical risks and economic cycles in different regions. Adjusting geographic exposure can help optimize risk and return potential.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    31%
  • Mid-cap
    19%
  • Small-cap
    5%
  • Micro-cap
    2%

The portfolio's market capitalization is primarily in mega and big caps, comprising 73% of the total. This skew towards larger companies typically offers stability and steady growth, aligning with a balanced risk profile. However, the smaller allocation to small and micro-cap stocks may limit potential gains from high-growth opportunities. Consider rebalancing to include more mid and small-cap stocks for diversification and growth potential, while monitoring the associated risks.

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 suggests the best possible risk-return ratio for the given assets. This approach focuses on maximizing returns for a given level of risk by adjusting the allocation between existing assets. While the portfolio is already well-diversified, slight adjustments in weightings could enhance efficiency. Regularly review the portfolio's alignment with the Efficient Frontier to ensure optimal performance.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 1.90%

The portfolio offers a total dividend yield of 1.90%, with the international ETF contributing a higher yield. Dividends provide a steady income stream, beneficial for long-term investors seeking regular returns. This yield aligns well with typical equity portfolios, offering a balance between growth and income. Consider the role of dividends in your investment strategy and whether increasing dividend-focused investments could enhance portfolio income without sacrificing growth potential.

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 total expense ratio (TER) is 0.05%, which is impressively low. This cost efficiency supports better long-term performance by minimizing fees that can erode returns. Compared to industry averages, this TER is favorable, reflecting Vanguard's reputation for low-cost investing. Maintaining low costs is crucial for optimizing returns, so continue monitoring expense ratios and consider low-cost alternatives when making adjustments to the portfolio.

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