A balanced portfolio with a strong focus on US equities and moderate international exposure
Report created on Dec 12, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 80.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 15.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 5.00%
The portfolio is heavily weighted towards equities, with 80% invested in the Vanguard S&P 500 ETF and 15% in the Vanguard Total International Stock Index Fund ETF. This allocation indicates a strong preference for stock market exposure, primarily in the US, with a modest international presence. The remaining 5% is in the Vanguard Total Bond Market Index Fund ETF, providing some fixed-income stability. This composition suggests a growth-oriented strategy with some diversification benefits. While equities offer potential for higher returns, they also come with higher volatility. Consider whether the current allocation aligns with your risk tolerance and financial goals.
Growth
Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 12.81%, suggesting strong past performance. However, it's important to note the maximum drawdown of -32.83%, which highlights the potential for significant short-term losses. This performance is based on historical data, which may not predict future outcomes. While the past success is encouraging, it's crucial to evaluate whether this level of volatility is acceptable for your investment horizon. To mitigate potential risks, consider diversifying further into other asset classes or regions.
Projection
The Monte Carlo simulation projects potential future outcomes by analyzing historical data. With 1,000 simulations, the portfolio shows an annualized return of 8.13%, and 961 simulations resulted in positive returns. The 5th percentile suggests a potential end portfolio value of 13.03%, while the 50th and 67th percentiles predict 166.22% and 235.37%, respectively. Although these projections offer insight into possible future performance, they are based on historical data and assumptions, which have limitations. Use these projections as one of many tools to assess your portfolio's potential and make informed adjustments.
Asset classes
- Stocks 95%
- Bonds 5%
The portfolio's allocation is predominantly in stocks, with 94.71% exposure, and a minimal 4.94% in bonds. This heavy emphasis on equities indicates a high-risk, high-reward strategy, suitable for investors with a long-term horizon. The limited bond allocation provides some diversification and stability but may not be sufficient to cushion against market volatility. Consider increasing the bond allocation if you prefer a more balanced risk profile. Diversifying across asset classes can help manage risks while potentially enhancing returns over time.
Sectors
- Technology 28%
- Financials 13%
- Health Care 10%
- Consumer Discretionary 10%
- Industrials 8%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 3%
- Basic Materials 3%
- Utilities 3%
- Real Estate 2%
The sectoral allocation reveals a significant concentration in technology at 28.37%, followed by financial services at 13.41% and healthcare at 10.33%. This concentration in specific sectors can lead to higher volatility, particularly if these sectors experience downturns. While technology has been a strong performer, consider diversifying across other sectors to reduce sector-specific risks. A more balanced sectoral allocation can provide stability and resilience against market fluctuations, potentially improving the portfolio's overall risk-adjusted returns.
Regions
- North America 81%
- Europe Developed 6%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily skewed towards North America, with 80.69% exposure. This concentration may limit diversification benefits and increase vulnerability to regional economic downturns. While the US market has historically been strong, consider increasing exposure to other regions, such as Europe or Asia, to enhance diversification. A more geographically balanced portfolio can help mitigate risks associated with regional economic or political events, potentially improving long-term performance.
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 potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio based on current assets. This optimization focuses on adjusting the allocation between existing assets to achieve the most efficient portfolio. However, it does not consider diversification or other specific goals. By reallocating assets to achieve an optimal balance, you can potentially enhance returns while managing risk. Regularly reviewing and adjusting the portfolio in line with the Efficient Frontier can help maintain an effective risk-return balance.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.60%
- Vanguard S&P 500 ETF 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Weighted yield (per year) 1.58%
The portfolio's dividend yield stands at 1.58%, with contributions from the bond and international stock ETFs. While dividends provide a steady income stream, the yield is relatively modest compared to historical averages. Consider reinvesting dividends to take advantage of compounding returns, or explore higher-yielding investments if income generation is a priority. Balancing growth and income can help achieve a more diversified return profile, catering to both capital appreciation and income needs.
Ongoing product costs
- Vanguard Total Bond Market Index Fund ETF Shares 0.03%
- Vanguard S&P 500 ETF 0.03%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.04%
The portfolio's total expense ratio (TER) is 0.04%, indicating low management costs. This cost efficiency is beneficial for long-term investors, as lower fees can significantly enhance net returns over time. While the current costs are competitive, it's essential to regularly review and compare with similar products to ensure continued cost-effectiveness. Maintaining a focus on minimizing investment costs can improve your portfolio's overall performance, allowing more of your money to work towards achieving your financial goals.
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