Balanced Broadly Diversified Portfolio with Strong Historic Performance and Low Costs Offers Growth Potential and Moderate Risk

Report created on Nov 22, 2024

Risk profile Info

4/7
Balanced
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Diversification profile Info

4/5
Broadly Diversified
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Positions

The portfolio is comprised of two Vanguard ETFs, with 70% allocated to the Total Stock Market Index Fund and 30% to the Total International Stock Index Fund. This composition ensures broad diversification across various sectors and geographies while maintaining a balanced risk profile. With a risk score of 4 out of 7, the portfolio is moderately risky, suitable for those seeking growth with some level of risk. The diversification score of 4 out of 5 indicates a well-diversified portfolio, reducing the impact of sector-specific downturns.

Growth Info

Historically, this portfolio has shown a commendable performance with a compound annual growth rate (CAGR) of 11.35%. This suggests that a hypothetical investment would have grown significantly over time. Despite a maximum drawdown of -34.61%, the portfolio has demonstrated resilience, recovering its value and providing substantial returns. The days that make up 90% of returns are relatively few, indicating that the portfolio's performance is driven by a few key periods of strong growth.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method provides a range of possible outcomes based on historical data. The results showed a median return of 235.58%, with a 5th percentile return of 9.03% and a 67th percentile return of 331.45%. The high number of simulations with positive returns (968 out of 1,000) suggests a favorable outlook. The annualized return of all simulations stands at 10.04%, indicating potential for continued growth.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is primarily invested in stocks, accounting for 99.4% of assets. This high allocation to equities offers significant growth potential but also introduces volatility. A small portion is held in cash and other assets, providing some liquidity but not significantly impacting the overall risk profile. For investors seeking to reduce risk, increasing the allocation to fixed-income securities could be considered, though this may lower potential returns.

Sectors Info

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

The sector allocation is diverse, with technology (25.44%), financial services (15.58%), and healthcare (10.83%) being the largest sectors. This distribution provides exposure to various economic segments, reducing reliance on any single sector. While technology is a growth driver, its volatility should be monitored. A more balanced sector allocation could be achieved by increasing exposure to defensive sectors like utilities or consumer staples, thus enhancing stability.

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 (72%), with additional exposure to developed Europe, Asia, and emerging markets. This distribution provides a good mix of developed and emerging market exposure, which can enhance returns and diversification. However, the heavy reliance on North American markets could pose a risk if this region experiences economic challenges. A more balanced geographic allocation could help mitigate regional 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 is close to the efficient frontier, indicating it is relatively efficient given its risk-return profile. However, it is not the optimal portfolio, which suggests there is room for improvement. The optimal portfolio has an expected return of 13.59% with a risk level of 18.00%. To achieve a more optimal portfolio, investors could consider adjusting their risk tolerance and exploring different asset allocations. This may involve reassessing their financial goals and risk appetite.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.81%

With a total dividend yield of 1.81%, the portfolio provides a modest income stream. The Vanguard Total Stock Market Index Fund ETF offers a yield of 1.3%, while the Total International Stock Index Fund ETF offers a higher yield of 3.0%. For investors seeking higher income, increasing the allocation to dividend-focused investments or funds could be considered. However, this may come at the cost of reduced 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 low costs, with a total expense ratio (TER) of 0.04%. This is achieved through the use of Vanguard ETFs, known for their cost-effective management. Low costs are crucial for maximizing net returns over time, as they reduce the drag on performance. Investors should continue to prioritize low-cost investment options to enhance long-term returns. Monitoring fund expenses and seeking cost-effective alternatives can further optimize the portfolio.

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