The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.
The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.
Balanced Investors
Suitable for investors who value a balanced approach, this portfolio aligns with moderate risk tolerance, aiming for growth and stability. Ideal for those with a medium to long-term investment horizon, it provides broad diversification across sectors and geographies. Investors should be comfortable with stock market volatility and seek both capital appreciation and some income through dividends. This portfolio suits individuals who prioritize low costs and broad market exposure, focusing on steady, long-term growth with manageable risk.
The portfolio is composed predominantly of ETFs, with Vanguard S&P 500 ETF taking up 45% of the allocation. This is complemented by a mix of broad market and dividend-focused ETFs, including Vanguard Total Stock Market Index Fund ETF Shares, Vanguard Total International Stock Index Fund ETF Shares, Vanguard High Dividend Yield Index Fund ETF Shares, and Schwab U.S. Dividend Equity ETF. The portfolio is broadly diversified across asset classes and sectors, though it heavily leans towards stocks. This mix provides a solid foundation for long-term growth while maintaining a balanced risk profile.
Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 12.14%. A hypothetical initial investment would have experienced a maximum drawdown of -34.11%, which is significant but expected in a stock-heavy portfolio. The portfolio's returns are concentrated, with just 29 days accounting for 90% of the gains. This indicates periods of volatility, but the overall growth trajectory remains positive. Investors should be prepared for fluctuations but can be optimistic about the long-term return potential.
A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. Assuming a hypothetical initial investment, the portfolio's projected annualized return is 12.43%. The 5th percentile outcome shows a 48.95% return, while the median and 67th percentile outcomes are 335.4% and 476.38%, respectively. Almost all simulations resulted in positive returns, highlighting the portfolio's potential for substantial growth. However, investors should remember that these are projections and actual results may vary.
The portfolio is heavily weighted towards stocks, with 99.66% allocated to this asset class. A small portion is held in cash and other categories, but these are negligible. This allocation suggests a focus on capital appreciation over income or preservation. While stocks offer higher growth potential, they also come with increased volatility. Investors should consider their risk tolerance and investment goals when deciding if this stock-heavy approach aligns with their financial strategy.
The sector allocation within the portfolio is diverse, with technology, financial services, and healthcare being the top three sectors. This diversification across sectors helps mitigate risks associated with downturns in any single industry. However, the portfolio is still heavily exposed to the U.S. market, which could lead to overreliance on the American economy. Maintaining a balanced sector allocation is crucial for reducing sector-specific risks and ensuring steady growth across different economic cycles.
Geographically, the portfolio is predominantly focused on North America, which accounts for 85.51% of the allocation. Other regions, such as Europe Developed and Asia Emerging, represent smaller portions. This U.S.-centric focus may limit exposure to growth opportunities in other parts of the world. Diversifying geographically can help spread risk and tap into emerging markets with high growth potential. Investors should weigh the benefits of geographic diversification against their comfort with international markets.
There is a high correlation among several assets in the portfolio, particularly between Vanguard Total Stock Market Index Fund ETF Shares, Schwab U.S. Dividend Equity ETF, Vanguard S&P 500 ETF, and Vanguard High Dividend Yield Index Fund ETF Shares. This means these assets tend to move in the same direction, which can amplify both gains and losses. While correlation can be advantageous in a rising market, it can also increase risk during downturns. Diversifying with less correlated assets can help balance the portfolio.
The portfolio's dividend yield stands at 1.93%, with contributions from various ETFs. Schwab U.S. Dividend Equity ETF offers the highest yield at 3.4%, while other ETFs like Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares provide lower yields. This dividend income can be a valuable component for investors seeking regular cash flow. However, the overall yield is moderate, reflecting the portfolio's focus on growth. Investors should consider their income needs when evaluating this aspect.
The portfolio's total expense ratio (TER) is 0.04%, which is very low and indicates cost-efficient management. Individual ETFs have expense ratios ranging from 0.03% to 0.08%, reflecting a focus on keeping investment costs minimal. Lower fees can significantly impact long-term returns, making this portfolio attractive for cost-conscious investors. By maintaining low costs, investors can retain more of their returns, which is especially beneficial in compounding growth over time. This cost efficiency aligns well with a balanced investment strategy.
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.
The current portfolio is broadly diversified, but due to overlapping, highly correlated assets, further optimization is not recommended. Instead, focus on maintaining the current balance and consider slight adjustments if personal risk tolerance or financial goals change. To achieve a riskier or more conservative portfolio, consider adjusting the allocation towards stocks or bonds, respectively, along the efficient frontier. However, given the portfolio's balanced nature, it may already align well with the investor's goals, so major changes might not be necessary.
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