Broadly Diversified Balanced Portfolio with Low Costs and Strong Historic Performance for Moderate Risk Investors

Report created on Nov 30, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed of two main ETFs: the Vanguard S&P 500 ETF, making up 70% of the portfolio, and the Vanguard Total International Stock Index Fund ETF Shares, comprising 30%. This allocation indicates a strong emphasis on U.S. equities, with a significant portion also dedicated to international exposure. Such a composition is suitable for investors looking for steady growth with a balanced risk approach. The focus on ETFs also suggests a strategy to minimize costs while achieving broad market exposure. Maintaining this balance can help in achieving consistent returns over the long term.

Growth Info

Historically, this portfolio has demonstrated impressive performance, with a compound annual growth rate (CAGR) of 11.78%. This suggests that an initial investment would have grown substantially over time. However, it's important to note the maximum drawdown of -33.84%, which indicates potential volatility during market downturns. Despite this, the portfolio's overall performance has been strong, with significant gains occurring over a relatively small number of trading days. This highlights the importance of staying invested and not reacting impulsively to market fluctuations.

Projection Info

Using a Monte Carlo simulation, which involves running multiple scenarios to predict potential future outcomes, the portfolio shows promising forward projections. Assuming a hypothetical initial investment, results indicate a 50th percentile return of 253.99% and a 67th percentile return of 373.61%. These projections suggest that the portfolio could continue to deliver solid returns, although there's always inherent uncertainty. With 970 out of 1,000 simulations showing positive returns, the portfolio appears well-positioned for future growth, but investors should remain aware of potential risks.

Asset classes Info

  • Stocks
    99%

The portfolio is predominantly invested in stocks, accounting for 99.49% of the allocation, with minor allocations in cash and other categories. This high equity concentration aligns with a strategy aimed at capital appreciation. While this can lead to substantial growth, it also introduces higher volatility. Investors should consider their risk tolerance and time horizon when maintaining such a high equity allocation. Diversifying into other asset classes like bonds could help mitigate risks and provide more stability during market downturns.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation within the portfolio is diverse, with technology leading at 27.01%, followed by financial services and healthcare. This diversification across sectors provides a balanced exposure to various economic segments, reducing the impact of sector-specific downturns. However, the heavy weighting in technology suggests a tilt towards growth-oriented sectors. Investors should regularly review sector allocations to ensure they align with their investment goals and risk tolerance, potentially rebalancing to maintain desired exposure levels.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, with 71.92% allocated there, followed by smaller allocations in Europe and Asia. This concentration reflects a strong belief in the U.S. market's performance. While this has historically been a successful strategy, it's important to maintain awareness of global market trends. Diversifying further geographically could enhance the portfolio's resilience against regional economic downturns, providing a broader exposure to international growth opportunities.

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 optimization chart suggests there's room for improvement. By moving along the efficient frontier, investors can achieve a riskier or more conservative portfolio. To increase risk, one could shift more towards equities with higher growth potential, while a conservative approach might involve reallocating some assets into bonds or other fixed-income securities. Before making changes, it's crucial to re-evaluate investment goals and risk tolerance, ensuring any adjustments align with long-term objectives and financial needs.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.74%

The portfolio's dividend yield stands at 1.74%, with the Vanguard S&P 500 ETF contributing 1.2% and the Vanguard Total International Stock Index Fund ETF Shares offering 3.0%. This yield provides a modest income stream, which can be appealing for investors seeking some level of cash flow. However, the primary focus of this portfolio remains capital appreciation. Investors reliant on income might consider increasing their allocation to dividend-focused investments to boost their yield while maintaining growth potential.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

With an overall total expense ratio (TER) of 0.04%, this portfolio is extremely cost-efficient. The Vanguard S&P 500 ETF and the Vanguard Total International Stock Index Fund ETF Shares both offer low expense ratios, ensuring that more of the portfolio's returns are retained by the investor. Keeping costs low is a critical factor in maximizing long-term returns. Investors should continue to monitor expense ratios and seek out cost-effective investment options to maintain this advantage.

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