A cautious portfolio with strong US focus and moderate bond exposure for stability.

Report created on Dec 6, 2024

Risk profile

  • Secure
    Speculative

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.

Diversification profile

  • Focused
    Diversified

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.

Positions

This portfolio is primarily composed of ETFs, with 70% allocated to equities and 30% to bonds. The Vanguard Total Stock Market Index Fund ETF Shares and Vanguard S&P 500 ETF dominate the equity portion, making up a combined 70% of the portfolio. The bond allocation is split between the Vanguard Total Bond Market Index Fund and the Vanguard Short-Term Corporate Bond Index Fund, providing a layer of stability. This composition suggests a cautious investment profile, balancing growth potential with income stability. To further enhance diversification, consider introducing other asset classes or geographic regions that are currently underrepresented.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 10.38%, which is commendable for a cautious profile. However, it has also experienced a maximum drawdown of -27.73%, indicating potential volatility during market downturns. Understanding this performance helps set realistic expectations for future returns. This history underscores the importance of maintaining a balanced approach to risk and reward. To mitigate downside risk, consider adding assets with lower correlation to equities, such as international stocks or alternative investments.

Projection Info

The Monte Carlo simulation, which uses historical data to project future performance, suggests a median return of 188.21% over the investment horizon. However, it's important to remember that these projections are not guarantees, as they rely on past performance to simulate future possibilities. The 5th percentile projection of 23.81% highlights the potential for lower-than-expected outcomes. To prepare for various scenarios, consider maintaining a diversified portfolio that can withstand different market conditions. Regularly reviewing and adjusting the asset allocation can help manage risks effectively.

Asset classes Info

  • Stocks
    70%
  • Bonds
    30%

The portfolio's asset allocation heavily favors stocks (approximately 70%), with bonds making up the remaining 30%. This allocation aligns with a cautious risk profile, offering growth potential while providing income and stability through bonds. However, the lack of other asset classes, such as real estate or commodities, suggests limited diversification. Diversification across asset classes can reduce portfolio volatility and enhance risk-adjusted returns. Consider introducing additional asset classes to provide a buffer against equity market fluctuations and to capture opportunities in different economic environments.

Sectors Info

  • Technology
    22%
  • Financials
    9%
  • Health Care
    8%
  • Consumer Discretionary
    7%
  • Telecommunications
    6%
  • Industrials
    6%
  • Consumer Staples
    4%
  • Energy
    2%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    1%

Sector allocation shows a significant concentration in technology (22.22%) and financial services (9.23%), with other sectors like healthcare and consumer cyclicals also represented. This concentration in technology indicates a reliance on growth sectors, which can be volatile. While these sectors offer growth potential, they also expose the portfolio to sector-specific risks. To balance this, consider increasing exposure to defensive sectors, such as utilities or consumer staples, which can provide stability during market downturns. A well-rounded sector allocation can help mitigate sector-specific risks and enhance overall portfolio resilience.

Regions Info

  • North America
    70%

The portfolio's geographic exposure is predominantly in North America (69.63%), with minimal allocations to other regions. This heavy North American focus may limit the portfolio's ability to benefit from growth opportunities in other parts of the world. Geographic diversification can reduce the impact of region-specific economic downturns and capture growth in emerging markets. Consider increasing exposure to international markets, including Europe, Asia, and emerging economies, to enhance diversification and potentially improve risk-adjusted returns.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation between the Vanguard S&P 500 ETF and the Vanguard Total Stock Market Index Fund ETF Shares. This correlation suggests that these assets tend to move in tandem, offering limited diversification benefits. High correlation can increase portfolio risk, as declines in one asset are likely mirrored by declines in the other. To improve diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the existing portfolio, such as international equities or bonds with different credit profiles.

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 could potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. Currently, the high correlation between some assets suggests room for improvement. By adjusting the allocation between existing assets, the portfolio can achieve a more efficient balance. This optimization focuses on achieving the best possible risk-return ratio, rather than diversification alone. Consider reallocating assets to reduce correlation and enhance the portfolio's efficiency. Regularly reviewing and rebalancing the portfolio can help maintain its alignment with investment goals and risk tolerance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Short-Term Corporate Bond Index Fund ETF Shares 3.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Weighted yield (per year) 1.91%

The portfolio's overall dividend yield stands at 1.91%, with bond ETFs contributing significantly higher yields than equity ETFs. This yield provides a steady income stream, which can be attractive for cautious investors seeking regular cash flow. However, the relatively low dividend yield from equity ETFs suggests a focus on growth rather than income. To enhance income, consider increasing allocations to higher-yielding assets, such as dividend-focused equities or real estate investment trusts (REITs), while maintaining a balance between growth and income.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Short-Term Corporate Bond Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.03%

The portfolio benefits from low costs, with an average total expense ratio (TER) of 0.03%. Low costs are crucial for maximizing long-term returns, as they reduce the drag on investment performance. Vanguard's focus on cost-effective ETFs helps maintain efficiency in the portfolio. However, it's important to regularly review the cost structure to ensure it remains competitive. Consider exploring other low-cost investment options that may offer better diversification or risk-adjusted returns, while keeping expenses in check.

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