Balanced Broadly Diversified Portfolio with Strong US Focus and Low Costs Suitable for Moderate Risk Investors

Report created on Nov 23, 2024

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 strong focus on equities. The majority, 80%, is allocated to the Vanguard Total Stock Market Index Fund, providing broad exposure to the US stock market. Additionally, 15% is invested in the Vanguard Total International Stock Index Fund, offering international diversification. A smaller portion, 5%, is allocated to the Vanguard Total Bond Market Index Fund, providing some bond exposure. This composition suggests a balanced approach, with a focus on growth through equities while maintaining a small allocation to bonds for stability.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 11.87%. This indicates strong growth potential, although it has experienced a maximum drawdown of -33.65%, highlighting periods of significant volatility. The fact that 90% of returns are concentrated in just 30 days suggests that the portfolio's performance is driven by a few key periods, which is typical for equity-heavy portfolios. Investors should be prepared for potential ups and downs but can expect solid long-term growth based on historical data.

Projection Info

Using a Monte Carlo simulation, which models potential future performance through random sampling, the portfolio shows promising growth prospects. With 1,000 simulations, the median (50th percentile) outcome is a return of 142.75%, while the 5th percentile outcome is a modest 2.78%. The annualized return across all simulations is 7.32%, indicating a strong likelihood of positive returns. This forward projection suggests that the portfolio is well-positioned for future growth, albeit with some variability in outcomes due to market fluctuations.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

The portfolio is heavily weighted towards stocks, with 94.6% of assets in equities, reflecting a growth-oriented strategy. Bonds make up 4.9%, providing some diversification and risk mitigation. The minimal allocation to cash and other asset classes indicates a focus on maximizing returns through equities. This asset class distribution is suitable for investors seeking growth but may expose the portfolio to higher volatility. Consider increasing bond exposure for a more conservative approach or maintaining the current allocation for continued growth potential.

Sectors Info

  • Technology
    27%
  • Financials
    14%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio is well-diversified across various sectors, with a notable 26.6% in technology, followed by financial services and healthcare. This sector allocation aligns with broader market trends and provides exposure to key growth areas. The presence of 11 sectors indicates a balanced approach, reducing the risk associated with any single sector. However, the heavy reliance on technology may increase volatility. Consider reviewing sector allocations periodically to ensure alignment with market conditions and personal investment goals.

Regions Info

  • North America
    81%
  • Europe Developed
    6%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio has a strong emphasis on North America, with 80.8% of assets allocated there. This reflects a focus on the US market, which has historically provided strong returns. The remaining 19.2% is spread across various international regions, offering some global diversification. This geographical composition is suitable for investors who are confident in the US market's continued performance but may benefit from increased international exposure to mitigate regional risks and capitalize on global 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 is already broadly diversified, but there is room for optimization along the efficient frontier. By adjusting the allocation between stocks and bonds, investors can tailor their risk profile to be more conservative or riskier. For those seeking lower risk, increasing the bond allocation could provide more stability. Conversely, those comfortable with higher risk may maintain or increase their equity exposure. Before making changes, it's essential to assess personal risk tolerance and financial goals, ensuring alignment with the desired investment strategy.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.67%

The portfolio's dividend yield is 1.67%, with contributions from all three ETFs. The Vanguard Total Bond Market Index Fund offers the highest yield at 3.6%, providing some income stability. The Vanguard Total Stock Market Index Fund and the Vanguard Total International Stock Index Fund contribute 1.3% and 3.0%, respectively. This dividend yield can supplement growth, providing a modest income stream. Investors seeking higher income may consider increasing exposure to higher-yielding assets or funds.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • 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) 0.04%

The portfolio is cost-efficient, with a total expense ratio (TER) of 0.04%. This low-cost structure is a significant advantage, as it minimizes the drag on returns. Each ETF within the portfolio has a competitive expense ratio, ensuring that more of the investment returns are retained by the investor. Maintaining a focus on low-cost investments is crucial for optimizing long-term performance. Regularly review the expense ratios to ensure continued cost efficiency, especially if considering adding new funds or asset classes.

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