A predominantly US-focused equity portfolio with strong growth potential and low expense ratios

Report created on Dec 26, 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 consists primarily of two ETFs: the Vanguard Total Stock Market Index Fund (80%) and the Vanguard Total International Stock Index Fund (20%). This composition suggests a strong focus on equities, with a significant tilt towards the US market. Compared to a typical balanced portfolio, which often includes bonds or other asset classes, this portfolio is heavily weighted in stocks. This approach can offer substantial growth potential but may also bring higher volatility. To align with a more traditional balanced portfolio, consider incorporating other asset classes like bonds or real estate to manage risk more effectively.

Growth Info

Historically, this portfolio has demonstrated impressive growth with a Compound Annual Growth Rate (CAGR) of 12.12%. This performance is quite favorable compared to typical benchmark returns. However, the portfolio also experienced a maximum drawdown of -34.71%, indicating significant volatility during market downturns. While past performance is not indicative of future results, the historical data suggests a strong growth trajectory. To mitigate future drawdowns, consider diversifying further into less volatile asset classes such as bonds, which can provide stability during market fluctuations.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, indicate a wide range of potential returns for this portfolio. With 1,000 simulations, the median (50th percentile) outcome projects a substantial growth of 254.35%. The simulations also show a high likelihood of positive returns, with 968 out of 1,000 scenarios yielding gains. However, it's crucial to note that these projections are based on past data and cannot guarantee future performance. To enhance predictability, regularly review and adjust your portfolio in response to changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's asset allocation is heavily skewed towards stocks, comprising over 99% of total assets. This concentration in a single asset class suggests a high potential for growth but also increased exposure to market volatility. In comparison, a balanced portfolio typically includes a mix of stocks, bonds, and other assets to spread risk. To improve diversification, consider adding fixed-income securities or alternative investments, which can provide a buffer against stock market fluctuations and enhance overall portfolio stability.

Sectors Info

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

Sector allocation in this portfolio is notably concentrated in technology (27.25%), followed by financial services and healthcare. This heavy tech weighting could lead to higher volatility, especially during periods of regulatory changes or interest rate hikes. Compared to common benchmarks, this sector concentration may expose the portfolio to sector-specific risks. To achieve a more balanced sector distribution, consider reallocating some funds towards underrepresented sectors, such as utilities or real estate, which can provide stability and reduce overall risk.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with 81.22% exposure. This heavy concentration in a single region may limit diversification benefits and expose the portfolio to region-specific risks. Compared to global benchmarks, this portfolio has lower exposure to emerging markets, which could provide growth opportunities. To enhance geographic diversification and mitigate regional risks, consider increasing allocations to international markets, including emerging economies, which can offer growth potential and reduce reliance on the US market.

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 risk-return profile can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. This approach helps in finding the optimal mix of assets that maximizes returns for a given level of risk. While the portfolio is already strongly aligned with growth, further optimization could involve slight adjustments in asset weights to enhance efficiency. Regularly reassessing the portfolio's alignment with the Efficient Frontier ensures that it remains well-positioned for both current market conditions and future goals.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.62%

The portfolio's dividend yield stands at 1.62%, with the Vanguard Total International Stock Index Fund contributing a higher yield of 3.3%. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. However, the overall yield is relatively modest, reflecting the portfolio's growth orientation. For investors seeking higher income, consider reallocating towards dividend-focused funds or stocks, which can enhance cash flow and provide a cushion during market downturns, while still maintaining 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) 0.04%

The portfolio benefits from impressively low costs, with a Total Expense Ratio (TER) of just 0.04%. This low-cost structure supports better long-term performance, as fewer expenses eat into returns. Compared to industry averages, these costs are highly competitive, which is a strong advantage for maximizing net returns. Maintaining these low costs is crucial, so regularly review your portfolio for any changes in fees. If you consider new investments, prioritize those with similarly low expense ratios to preserve this cost advantage.

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