A broadly diversified portfolio with moderate risk and low costs focused on US and international stocks
Report created on Jan 13, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 75.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 25.00%
This portfolio is heavily weighted towards stocks, with 75% in the Vanguard Total Stock Market Index Fund ETF and 25% in the Vanguard Total International Stock Index Fund ETF. This composition indicates a strong focus on equity markets, which can offer higher growth potential but also higher volatility. A typical balanced portfolio might include a mix of stocks and bonds for risk mitigation. Consider adding fixed-income assets to reduce volatility and provide a buffer during market downturns, aligning with a balanced risk profile.
Growth
The portfolio has demonstrated a solid historical performance with a Compound Annual Growth Rate (CAGR) of 11.75%. This figure suggests strong growth over time, outperforming many traditional benchmarks. However, the maximum drawdown of -34.65% highlights the potential for significant losses in market downturns. While past performance is not indicative of future results, understanding these metrics is crucial for setting realistic expectations. Consider whether this level of volatility aligns with your risk tolerance and financial goals.
Projection
The Monte Carlo simulation projects potential future outcomes using historical data, offering a range of possible returns. With 1,000 simulations, the median outcome suggests a 235.81% increase, while the 5th percentile indicates a 13.38% increase. These projections, while insightful, rely on past data and don't account for future market conditions. Use these figures as a guide, but remain flexible to adjust strategies as market dynamics evolve. Regularly review your portfolio to ensure it remains aligned with your objectives.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is almost entirely composed of stocks, with negligible allocations to cash and other assets. This singular focus can result in higher returns but also increased risk, as it lacks the diversification benefits of including other asset classes like bonds or real estate. A more diversified asset allocation could help mitigate risks and smooth out returns over time. Consider incorporating a broader range of asset classes to enhance diversification and potentially stabilize the portfolio during volatile periods.
Sectors
- Technology 26%
- Financials 15%
- Health Care 11%
- Consumer Discretionary 10%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Real Estate 3%
- Utilities 3%
The portfolio is diversified across 11 sectors, with a significant concentration in technology (26.36%), financial services (15.31%), and healthcare (10.93%). This sectoral distribution aligns well with common benchmarks, indicating a balanced approach to sector exposure. However, the heavy reliance on technology may increase volatility, especially during interest rate hikes. Consider monitoring sector performance and rebalancing if necessary to maintain a diversified and resilient portfolio that can withstand various economic cycles.
Regions
- North America 77%
- Europe Developed 10%
- Asia Emerging 4%
- Japan 4%
- Asia Developed 3%
- Australasia 1%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is predominantly focused on North America (76.65%), with additional exposure to Europe and Asia. This allocation reflects a strong home bias, which is common among US investors. While this approach can benefit from the stability and growth of the US market, it may limit exposure to emerging markets with higher growth potential. Consider adjusting geographic allocations to include more diverse regions, enhancing global exposure and reducing reliance on any single market.
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's current composition can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio. This approach focuses on reallocating existing assets to achieve a more efficient portfolio without necessarily adding new asset classes. While this optimization can enhance returns for a given level of risk, it's important to remember that efficiency doesn't equate to diversification. Regularly review allocations and consider optimization to ensure alignment with your risk-return preferences.
Dividends
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Vanguard Total International Stock Index Fund ETF Shares 3.40%
- Weighted yield (per year) 1.82%
The portfolio's dividend yield is 1.82%, with the Vanguard Total Stock Market Index Fund ETF yielding 1.3% and the Vanguard Total International Stock Index Fund ETF yielding 3.4%. Dividends provide a steady income stream, which can be reinvested or used for cash flow needs. This yield is moderate, offering a balance between income and growth. Consider whether the current dividend yield aligns with your income needs and explore opportunities to adjust the yield by reallocating to higher or lower-yielding assets as needed.
Ongoing product costs
- Vanguard Total Stock Market Index Fund ETF Shares 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 impressively low at 0.04%, thanks to the cost-efficient Vanguard ETFs. Low costs are crucial for enhancing long-term returns, as they minimize the drag on performance. This cost structure is well-aligned with best practices in portfolio management, ensuring that more of your investment returns are retained. Continue to monitor expenses and consider maintaining this cost-effective strategy to support long-term growth and performance.
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