Balanced portfolio with a strong focus on US equities and minimal international exposure

Report created on Jan 16, 2025

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 heavily weighted towards US equities, comprising 80% of the allocation through the Vanguard S&P 500 ETF, with the remaining 20% invested in international stocks via the Vanguard Total International Stock Index Fund ETF Shares. This composition suggests a preference for the stability and growth potential of US markets, while still maintaining some level of global diversification. The asset class distribution is almost entirely in stocks, with a negligible cash position, indicating a growth-oriented approach within a balanced risk framework.

Growth Info

Historically, this portfolio has achieved a Compound Annual Growth Rate (CAGR) of 12.29%, with a maximum drawdown of -33.88%. This performance is indicative of the inherent volatility associated with a stock-focused portfolio but also demonstrates the potential for significant returns. The days contributing to 90% of returns being so few highlights the impact of short-term, high-gain periods on overall performance, underscoring the importance of staying invested through market cycles to capture these gains.

Projection Info

Using a Monte Carlo simulation, which projects future outcomes based on historical data, this portfolio shows a wide range of potential future returns. With 979 out of 1,000 simulations resulting in positive returns, the median projection suggests a 244.1% increase, highlighting the potential for substantial growth. However, it's important to remember that these projections are speculative and depend on historical market behaviors continuing into the future.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's almost exclusive focus on stocks, with a 99% allocation, positions it for growth but also exposes it to market volatility. This high equity exposure is typical for investors with a higher risk tolerance and a longer-term investment horizon. The minimal cash holding enhances growth potential but reduces liquidity and increases short-term risk.

Sectors Info

  • Technology
    28%
  • Financials
    16%
  • Consumer Discretionary
    10%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is led by technology, financial services, and consumer cyclicals, making up over half of the portfolio. This concentration in sectors that can exhibit high growth but also significant volatility may influence the portfolio's performance, especially in market downturns. Diversifying across a broader range of sectors could mitigate risk without drastically compromising growth potential.

Regions Info

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

The geographic allocation heavily favors North America, with 81% exposure, while the rest of the world collectively makes up only 19%. This US-centric approach has historically provided strong returns but may miss out on growth opportunities in emerging markets and other developed regions. Increasing international exposure could offer enhanced diversification benefits and access to global growth trends.

Market capitalization Info

  • Mega-cap
    46%
  • Large-cap
    33%
  • Mid-cap
    18%
  • Small-cap
    1%

The portfolio's focus on mega and big-cap stocks, which constitute 79% of the allocation, aligns with its balanced risk profile by investing in large, established companies. However, the limited exposure to medium, small, and micro-cap stocks restricts potential for higher growth rates these segments can offer, albeit with increased risk.

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.

Considering the Efficient Frontier, this portfolio appears well-positioned for a balanced investor, emphasizing growth while managing risk through diversification across major sectors and geographies. However, there's room for optimization by including assets with lower correlation to equities, which could improve the risk-return ratio without significantly sacrificing growth potential.

Dividends Info

  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.62%

The portfolio's dividend yield stands at 1.62%, with the international fund offering a higher yield than the US-focused ETF. While dividends contribute to total returns, the primary focus here appears to be on capital appreciation. Investors seeking higher income might consider reallocating towards assets with higher yield potential, though this could alter the risk-return profile.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.05%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from exceptionally low costs, with total expense ratios (TER) averaging 0.03%. This efficient cost structure supports higher net returns over the long term, demonstrating effective cost management in fund selection. Keeping costs low is crucial for maximizing investment growth, especially in a low-yield environment.

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