A balanced portfolio with strong diversification and a focus on US equities
Report created on Apr 9, 2025Risk profile
4/7
Diversification profile
5/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 60.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 20.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00%
The portfolio is composed of three main ETFs: Vanguard S&P 500 ETF at 60%, Vanguard Total Bond Market Index Fund ETF Shares at 20%, and Vanguard Total International Stock Index Fund ETF Shares at 20%. This structure leans heavily on US equities, which can offer growth but may limit exposure to other regions. A balanced mix of stocks and bonds aligns with a moderate risk profile, providing potential for growth while cushioning against volatility. Consider maintaining this composition if your goal is steady growth with some risk mitigation.
Growth
Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 9.29%, indicating strong performance. The maximum drawdown of -28.99% reflects periods of market stress, which is typical for equity-heavy portfolios. Compared to benchmarks, this performance is commendable, though past performance does not guarantee future results. To maintain this growth, continue monitoring market conditions and adjust allocations as necessary to align with your risk tolerance and goals.
Projection
Using Monte Carlo simulations, which predict potential future outcomes based on historical data, the portfolio shows a wide range of possibilities. With 1,000 simulations, 906 resulted in positive returns, and the median projected growth is 6.95% annually. While this provides a glimpse into potential outcomes, it's important to remember that these projections are not guarantees. Regularly review your portfolio to ensure it remains aligned with your objectives and risk tolerance.
Asset classes
- Stocks 79%
- Bonds 20%
- Cash 1%
The portfolio's asset class allocation includes 79% in stocks and 20% in bonds, with a small cash position. This mix offers a balance between growth potential and income generation, suitable for a moderate risk profile. Compared to typical benchmarks, this allocation is well-balanced, providing diversification while maintaining exposure to equities for growth. Consider periodically reassessing your allocations to ensure they continue to meet your financial goals and risk tolerance.
Sectors
- Technology 22%
- Financials 13%
- Consumer Discretionary 9%
- Health Care 8%
- Industrials 7%
- Telecommunications 7%
- Consumer Staples 5%
- Energy 3%
- Basic Materials 2%
- Utilities 2%
- Real Estate 2%
The sector allocation is led by technology at 22%, followed by financial services at 13% and consumer cyclicals at 9%. This distribution is in line with common benchmarks, offering broad sector exposure. Tech-heavy portfolios can experience higher volatility, especially during interest rate changes. To mitigate risks, ensure sector allocations align with your long-term strategy and consider rebalancing if any sector becomes disproportionately large.
Regions
- North America 61%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
The portfolio's geographic exposure is primarily in North America at 61%, with limited exposure to Europe and Asia. This US-centric focus aligns with many investors' strategies but can lead to concentration risk. While this has been beneficial recently, consider increasing international exposure to enhance diversification and potentially capture growth in emerging markets. Regularly review geographic allocations to ensure they align with your risk tolerance and investment goals.
Market capitalization
- Mega-cap 37%
- Large-cap 27%
- Mid-cap 14%
- Small-cap 1%
The portfolio's market capitalization is concentrated in mega and big caps, comprising 64% of the allocation. This focus offers stability and lower volatility, as larger companies tend to be more established. However, it may limit exposure to the potential high growth of small and mid-cap stocks. Consider diversifying market cap exposure to capture growth opportunities while maintaining a balance with more stable, larger companies.
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 balances risk and return based on current assets. This approach seeks the best possible risk-return ratio, enhancing potential performance without adding new assets. Regularly review your portfolio's position on the Efficient Frontier to ensure it aligns with your risk tolerance and goals.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.40%
- Vanguard S&P 500 ETF 1.50%
- Vanguard Total International Stock Index Fund ETF Shares 3.50%
- Weighted yield (per year) 2.28%
The overall portfolio dividend yield is 2.28%, with contributions from all three ETFs. Dividends provide a steady income stream, which can be reinvested or used for cash flow. This yield is attractive for a balanced portfolio, offering income alongside potential growth. Ensure that dividend yields align with your income needs and consider reinvesting dividends to enhance long-term growth.
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 0.05%
- Weighted costs total (per year) 0.03%
The portfolio boasts impressively low costs, with a Total Expense Ratio (TER) of 0.03%. This efficiency supports better long-term performance, as lower costs mean more of your returns stay in your pocket. Maintaining low-cost investments is crucial for optimizing returns, so continue prioritizing cost-effective options when making investment decisions.
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