A balanced portfolio with significant S&P 500 exposure and strong real estate presence

Report created on Dec 18, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio consists primarily of ETFs, with a heavy emphasis on the Vanguard S&P 500 ETF, which makes up 50% of the portfolio. Real estate is represented by the Vanguard Real Estate Index Fund at 20%. The remaining 30% is split between the Vanguard FTSE Developed Markets ETF and the Vanguard FTSE Emerging Markets ETF. This composition indicates a strong focus on equities, with a notable allocation to real estate. Understanding the composition helps in assessing potential risks and returns, as different asset types respond differently to market conditions. Consider diversifying further within asset types to manage risks better.

Growth Info

Historically, this portfolio has delivered a compound annual growth rate (CAGR) of 10.46%, reflecting strong past performance. However, it has also experienced a maximum drawdown of -35.03%, indicating significant potential volatility during market downturns. Historical performance provides insights into how the portfolio might react under various market conditions, but it's essential to remember that past performance doesn't guarantee future results. To mitigate potential drawdowns, consider incorporating more defensive assets or increasing cash reserves.

Projection Info

The Monte Carlo simulation, a tool that uses historical data to forecast potential future outcomes, indicates a 9.13% annualized return across 1,000 simulations. The 5th percentile shows a potential loss of -13.26%, while the 67th percentile suggests a gain of 282.05%. While these projections provide a range of possible outcomes, they rely on historical data and assumptions, which may not hold true in the future. To better prepare for uncertainties, consider stress-testing the portfolio under various economic scenarios.

Asset classes Info

  • Stocks
    79%
  • Real Estate
    20%
  • Cash
    1%

The portfolio is predominantly invested in stocks (79.3%) and real estate (20%). This allocation suggests a strong focus on growth through equities, with real estate providing a diversification benefit. Different asset classes respond differently to economic changes, and a heavy equity weighting can lead to higher volatility. To enhance diversification, consider adding fixed-income assets or other alternative investments, which may provide stability during market downturns.

Sectors Info

  • Real Estate
    22%
  • Technology
    21%
  • Financials
    13%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%

Sector allocation is quite diversified, with technology and real estate leading at 21.1% and 21.8%, respectively. Financial services and consumer cyclicals also hold significant portions. Sector diversification is crucial as it reduces the impact of sector-specific downturns on the portfolio. However, the high concentration in technology and real estate may increase exposure to these sectors' specific risks. To balance sector risk, consider adjusting allocations to underrepresented sectors like utilities or healthcare.

Regions Info

  • North America
    71%
  • Asia Emerging
    9%
  • Europe Developed
    8%
  • Asia Developed
    4%
  • Japan
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America at 71.4%, with limited exposure to emerging markets and other regions. Geographic diversification helps mitigate risks associated with regional economic downturns. The current allocation suggests a reliance on the North American market, which could affect performance if this region underperforms. To enhance geographic diversification, consider increasing exposure to emerging markets or other underrepresented regions.

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 can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. Optimization involves adjusting the weightings of existing assets to achieve the desired risk-return balance. It's important to note that optimization focuses on maximizing efficiency, not necessarily diversification or other goals. Regularly reassess the portfolio's alignment with personal risk tolerance and investment objectives, and consider making adjustments as needed.

Dividends Info

  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.70%
  • Weighted yield (per year) 1.76%

The portfolio's overall dividend yield is 1.76%, with the Vanguard Real Estate Index Fund contributing a significant 3.9%. Dividends provide a steady income stream, which can be particularly beneficial during periods of market volatility. While the current yield is moderate, enhancing dividend income could improve cash flow and reduce reliance on capital gains. Consider reinvesting dividends to compound returns or reallocating to higher-yielding assets if income is a priority.

Ongoing product costs Info

  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, which is relatively low, thanks to the cost-effective nature of Vanguard ETFs. Low costs are crucial for long-term investment success, as they can significantly enhance net returns over time. Although costs are already minimal, it's still wise to regularly review and compare expense ratios to ensure they remain competitive. Consider reallocating to even lower-cost options if available, without compromising on diversification and performance.

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