A balanced portfolio with broad diversification and low costs for moderate risk investors

Report created on Dec 20, 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 predominantly composed of equity ETFs, with a significant portion in the Vanguard Total International Stock Index Fund ETF Shares (40%) and Vanguard S&P 500 ETF (36%). The remaining allocation is split between Schwab U.S. Dividend Equity ETF (12%) and Vanguard Extended Market Index Fund ETF Shares (12%). Compared to a typical balanced portfolio, this one leans heavily towards equities, suggesting a growth-oriented strategy. For a balanced profile, consider adding bonds or other fixed-income assets to reduce volatility and enhance stability.

Growth Info

Historically, the portfolio has delivered a strong performance with a CAGR of 10.27%, indicating robust growth over time. The max drawdown of -34.69% highlights the potential for significant temporary losses, typical of equity-heavy portfolios. By comparing this with a benchmark like the S&P 500, which has similar volatility, the portfolio's performance is competitive. Despite the high returns, investors should be prepared for market fluctuations and consider their risk tolerance before maintaining such an equity-focused allocation.

Projection Info

Monte Carlo simulations, which use historical data to project potential future outcomes, show a median return of 284.2% over the investment horizon. This suggests a promising outlook, though it's important to remember that past data doesn't guarantee future results. With 972 out of 1,000 simulations yielding positive returns, the portfolio appears well-positioned for growth. However, investors should remain cautious of the inherent uncertainties in projections and consider diversifying further to hedge against unexpected market downturns.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily skewed towards stocks, making up approximately 98.87% of the total allocation. While this can drive growth, it also increases exposure to market volatility. In comparison, a typical balanced portfolio would include a mix of stocks, bonds, and cash to mitigate risk. To enhance diversification and manage risk more effectively, consider incorporating more fixed-income or alternative assets, which can provide stability and reduce the impact of market swings.

Sectors Info

  • Technology
    21%
  • Financials
    17%
  • Industrials
    12%
  • Health Care
    11%
  • Consumer Discretionary
    11%
  • Consumer Staples
    7%
  • Telecommunications
    7%
  • Energy
    5%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    2%

The sector allocation is well-distributed, with technology (20.79%) and financial services (17.45%) leading the pack. This mirrors common benchmarks, indicating a balanced approach. However, tech-heavy portfolios can be volatile, especially during interest rate changes. While the sector spread is commendable, maintaining a watchful eye on sector trends and potential over-concentration is wise. Adjusting allocations as needed can help manage sector-specific risks and capitalize on emerging opportunities.

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 portfolio's geographic allocation is predominantly North America (62.71%), followed by Europe Developed (15.70%) and Asia Emerging (6.57%). This aligns with global benchmarks, providing a solid foundation for diversification. However, the limited exposure to emerging markets may restrict growth potential. Consider increasing allocations to underrepresented regions to enhance diversification and capture opportunities in faster-growing economies, while remaining mindful of 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 can be optimized using the Efficient Frontier to achieve the best possible risk-return ratio. This approach suggests reallocating existing assets to maximize returns for a given level of risk. While optimization focuses on efficiency, it may not fully address diversification or specific goals. Regularly reassessing the portfolio's alignment with personal objectives and market conditions can ensure it remains on track for optimal performance.

Dividends Info

  • Schwab U.S. Dividend Equity ETF 3.70%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Extended Market Index Fund ETF Shares 0.80%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.50%

The portfolio's dividend yield stands at 1.5%, with the Schwab U.S. Dividend Equity ETF contributing the most at 3.7%. Dividends can provide a steady income stream, which is particularly beneficial for investors seeking regular cash flow. While the current yield is moderate, reinvesting dividends can enhance long-term returns through compounding. Consider balancing high-yield assets with growth-oriented ones to optimize both income and capital appreciation.

Ongoing product costs Info

  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Extended Market Index Fund ETF Shares 0.06%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

With a total expense ratio (TER) of 0.06%, the portfolio is impressively cost-efficient. Low costs are crucial for maximizing long-term returns, as they minimize the drag on performance. This aligns well with best practices for cost management. Ensure continued cost-effectiveness by periodically reviewing fees and considering lower-cost alternatives if available. Maintaining a focus on minimizing expenses can significantly enhance overall portfolio performance.

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