A globally diversified portfolio with balanced risk and low-cost structure

Report created on Dec 20, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed entirely of the Vanguard Total International Stock Index Fund ETF Shares, providing broad exposure to international equities. With a 100% allocation to a single ETF, this portfolio is straightforward but lacks diversification across different asset types. Common benchmark compositions typically include a mix of equities, fixed income, and sometimes alternative assets. While the ETF itself is diversified across various sectors and regions, adding other asset classes like bonds could reduce risk and enhance stability.

Growth Info

The historical performance of this portfolio, with a compound annual growth rate (CAGR) of 6.39%, indicates solid growth over time. This performance is in line with typical global equity benchmarks. However, the maximum drawdown of -35.96% highlights potential vulnerability during market downturns. Understanding past performance helps set realistic expectations, but it's important to note that historical data doesn't guarantee future results. To mitigate potential risks, consider incorporating assets with lower volatility.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests varied potential returns. With a median outcome of 103.13%, the projections are optimistic but also show a 5th percentile outcome of -30.81%. This highlights the inherent uncertainty in investing. While simulations provide insight into possible future scenarios, they rely on past data and assumptions. To manage expectations, it's wise to prepare for both positive and negative outcomes and periodically review the portfolio's alignment with financial goals.

Asset classes Info

  • Stocks
    98%
  • Cash
    2%

The portfolio's allocation is heavily weighted towards stocks, with 97.98% in equities and minimal exposure to cash and other assets. This equity-heavy allocation offers potential for higher returns but also increases risk. Compared to typical benchmark allocations, which often include bonds and other asset classes, this portfolio may be more volatile. Diversifying into other asset classes could help balance risk and return, providing a buffer during market fluctuations.

Sectors Info

  • Financials
    21%
  • Industrials
    15%
  • Technology
    13%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Basic Materials
    7%
  • Consumer Staples
    6%
  • Telecommunications
    6%
  • Energy
    5%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation within the ETF shows a balanced distribution, with significant exposure to financial services, industrials, and technology. This diversified sector exposure aligns well with common benchmarks, reducing the risk associated with sector-specific downturns. However, technology exposure, while beneficial in growth phases, may lead to higher volatility during interest rate changes. Regularly reviewing sector performance and trends can help maintain balanced exposure and capitalize on emerging opportunities.

Regions Info

  • Europe Developed
    38%
  • Asia Emerging
    16%
  • Japan
    15%
  • Asia Developed
    11%
  • North America
    8%
  • Australasia
    5%
  • Africa/Middle East
    3%
  • Latin America
    2%
  • Europe Emerging
    1%

The geographic allocation is well-diversified, with significant exposure to developed regions like Europe and Japan, and some allocation to emerging markets in Asia. This global diversification reduces reliance on any single economy and aligns with common benchmarks. However, the relatively low exposure to North America could limit potential gains from this region's growth. Balancing geographic exposure ensures resilience against regional economic shifts and captures opportunities across different markets.

Dividends Info

  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.60%

With a dividend yield of 1.6%, this portfolio provides a modest income stream. Dividends can offer a cushion during market downturns by providing regular income. For investors seeking income, this yield may be less competitive compared to other income-focused investments. Balancing growth and income is crucial, and introducing higher-yielding assets could enhance income potential without sacrificing growth prospects.

Ongoing product costs Info

  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's cost structure is impressively low, with a total expense ratio (TER) of 0.08%. This aligns with best practices for minimizing investment costs, which can significantly impact long-term returns. Low costs allow more of the portfolio's returns to compound over time, enhancing overall performance. Maintaining a focus on cost efficiency while exploring additional diversification options could further optimize the portfolio's potential.

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