A balanced portfolio with a focus on US equities and moderate bond exposure

Report created on Dec 19, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is structured with a significant allocation to equities, comprising approximately 79% of the total, while bonds make up about 19%. This composition aligns with a balanced investment strategy, offering potential for growth while maintaining some stability through bond holdings. Compared to common benchmarks, this allocation leans slightly more towards equities, which could be beneficial for capital appreciation. To ensure alignment with personal goals, consider whether this equity-heavy approach suits your risk tolerance and investment horizon.

Growth Info

Historically, this portfolio has demonstrated a Compound Annual Growth Rate (CAGR) of 9.69%, with a maximum drawdown of -28.92%. This performance indicates a strong growth potential but also highlights periods of significant volatility. Comparing this to a benchmark, the returns are competitive, though the drawdown suggests a need for risk management strategies. To mitigate future downturns, consider diversifying further or incorporating assets with lower volatility.

Projection Info

Using Monte Carlo simulations, which estimate potential future outcomes based on historical data, the portfolio's projections show a median return of 128.07%. While 92.2% of simulations resulted in positive returns, it's crucial to note that past performance does not guarantee future results. The simulations suggest a reasonable chance of achieving substantial growth, but it's important to remain aware of potential risks. Regularly review and adjust the portfolio to align with changing market conditions and personal circumstances.

Asset classes Info

  • Stocks
    79%
  • Bonds
    19%
  • Cash
    2%
  • Other
    1%

The portfolio's asset allocation is heavily weighted towards stocks, with bonds making up a smaller portion. This skew towards equities suggests a focus on capital growth, with bonds providing some income and stability. Compared to typical balanced portfolios, the equity allocation is on the higher side, which may increase risk. To enhance diversification, consider increasing exposure to bonds or other asset classes, depending on your risk tolerance and investment objectives.

Sectors Info

  • Technology
    20%
  • Financials
    13%
  • Health Care
    11%
  • Industrials
    10%
  • Consumer Staples
    7%
  • Telecommunications
    6%
  • Consumer Discretionary
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Consumer Discretionary
    2%
  • Real Estate
    2%

The portfolio has notable exposure to the technology sector, accounting for nearly 20% of the allocation. This concentration reflects confidence in tech-driven growth but also introduces sector-specific risks, such as volatility during interest rate hikes. Other sectors like financial services and healthcare provide additional balance. To mitigate sector risk, consider diversifying further across underrepresented sectors, ensuring a more balanced exposure aligned with broader market trends.

Regions Info

  • North America
    72%
  • Europe Developed
    7%
  • Asia Developed
    2%
  • Asia Emerging
    2%
  • Japan
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

With over 72% of assets allocated to North America, the portfolio shows a strong home bias. While this provides stability through familiar markets, it limits exposure to international growth opportunities. Compared to global benchmarks, this geographic focus may reduce diversification benefits. To enhance global diversification, consider increasing allocations to emerging markets or developed regions outside North America, aligning with global economic trends.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets, such as the Vanguard Information Technology and Growth Index Fund ETFs. High correlation means these assets often move in tandem, reducing diversification benefits during market downturns. By identifying and potentially replacing these overlaps with less correlated investments, you can enhance portfolio diversification and mitigate risks. Focus on assets that provide unique exposures and reduce overall portfolio volatility.

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 current portfolio can be optimized using the Efficient Frontier, which suggests an expected return of 6.25% at a risk level of 4.94%. This approach focuses on achieving the best possible risk-return ratio by adjusting asset allocations. Consider rebalancing the portfolio to align more closely with the Efficient Frontier, ensuring that you maximize returns for the level of risk you're willing to accept. This optimization process can enhance portfolio efficiency without sacrificing diversification.

Dividends Info

  • AMERICAN BALANCED FUND CLASS F-2 1.10%
  • Vanguard Total International Bond Index Fund ETF Shares 4.80%
  • iShares Core MSCI EAFE ETF 3.20%
  • iShares Core MSCI Emerging Markets ETF 2.80%
  • iShares MBS ETF 3.30%
  • PUTNAM EQUITY INCOME FUND CLASS Y SHARES 1.00%
  • Invesco Preferred ETF 5.50%
  • Schwab Short-Term U.S. Treasury ETF 6.10%
  • iShares TIPS Bond ETF 2.40%
  • iShares 20+ Year Treasury Bond ETF 3.90%
  • Vanguard Small-Cap Growth Index Fund ETF Shares 0.60%
  • Vanguard Small-Cap Value Index Fund ETF Shares 2.00%
  • Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares 4.40%
  • Vanguard Short-Term Corporate Bond Index Fund ETF Shares 3.90%
  • Vanguard Intermediate-Term Treasury Index Fund ETF Shares 3.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.50%
  • Vanguard Value Index Fund ETF Shares 2.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.84%

The portfolio's dividend yield stands at 1.84%, with contributions from various funds and ETFs. Dividends provide a steady income stream, which can be particularly appealing for income-focused investors. Higher-yielding assets like the Schwab Short-Term U.S. Treasury ETF contribute significantly to this yield. To optimize income, consider increasing allocations to high-dividend assets or funds, while ensuring they align with your overall investment strategy and risk profile.

Ongoing product costs Info

  • AMERICAN BALANCED FUND CLASS F-2 0.35%
  • Vanguard Total International Bond Index Fund ETF Shares 0.07%
  • iShares Core MSCI EAFE ETF 0.07%
  • iShares Core MSCI Emerging Markets ETF 0.09%
  • iShares MBS ETF 0.04%
  • PUTNAM EQUITY INCOME FUND CLASS Y SHARES 0.65%
  • Invesco Preferred ETF 0.50%
  • Schwab Short-Term U.S. Treasury ETF 0.03%
  • iShares TIPS Bond ETF 0.19%
  • iShares 20+ Year Treasury Bond ETF 0.15%
  • Vanguard Small-Cap Growth Index Fund ETF Shares 0.07%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard Intermediate-Term Corporate Bond Index Fund ETF Shares 0.04%
  • Vanguard Short-Term Corporate Bond Index Fund ETF Shares 0.04%
  • Vanguard Intermediate-Term Treasury Index Fund ETF Shares 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Value Index Fund ETF Shares 0.04%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.20%

The portfolio's total expense ratio (TER) is 0.2%, which is relatively low and supports better long-term performance by minimizing cost drag. Cost-efficient funds like Vanguard's ETFs contribute to this favorable cost structure. To maintain this advantage, continue to prioritize low-cost investment options and periodically review the portfolio for any high-fee assets that could be replaced with more cost-effective alternatives.

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