A broadly diversified portfolio focusing on stocks with moderate risk and low costs

Report created on Dec 14, 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 consists of two ETFs, with 70% in the Vanguard Total Stock Market Index Fund and 30% in the Vanguard Total International Stock Index Fund. The heavy allocation towards the total stock market index suggests a strong focus on U.S. equities, while the international index fund adds global exposure. This composition is typical for investors aiming for a balance between domestic growth and international diversification. To enhance diversification, consider adding other asset classes like bonds or real estate investment trusts (REITs) to the mix to mitigate risks and provide more stability during market fluctuations.

Growth Info

Historically, the portfolio has shown a compound annual growth rate (CAGR) of 11.86%, indicating strong past performance. However, it also experienced a maximum drawdown of -34.62%, reflecting significant volatility during market downturns. Understanding past performance helps in setting realistic expectations, but it's important to note that past results don't guarantee future outcomes. To manage potential downturns, consider rebalancing the portfolio periodically to maintain the desired risk level and taking profits during high market valuations to reallocate into safer assets.

Projection Info

The Monte Carlo simulation for this portfolio, with 1,000 iterations, shows a median projected growth of 270.56% over the investment horizon. The simulation uses historical data to generate potential future outcomes, providing a range of possibilities from worst-case to best-case scenarios. While the median outcome is encouraging, it's crucial to remember that simulations are based on historical data and assumptions that may not hold true. To prepare for various scenarios, maintain a flexible investment strategy that can adapt to changing market conditions and consider setting aside an emergency fund to cover unexpected needs.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.4% in equities and minimal cash or other asset classes. This concentration in stocks offers high growth potential but also increases exposure to market volatility. Diversifying across multiple asset classes can help reduce risk and improve stability. Consider incorporating fixed income assets, like bonds, which can provide steady income and act as a buffer during stock market downturns. Additionally, exploring alternative investments, such as commodities or real estate, could further enhance diversification and potentially improve risk-adjusted returns.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Health Care
    11%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is diversified, with technology, financial services, and healthcare being the top three sectors. Technology has the highest weighting at 25.44%, reflecting its strong growth potential. While sector diversification can help mitigate risks associated with individual sectors, overexposure to a single sector like technology may increase vulnerability to sector-specific downturns. To achieve better balance, consider adjusting allocations to underrepresented sectors, such as utilities or consumer defensives, which can provide more stability and consistent returns in volatile markets.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The geographic allocation is predominantly focused on North America, making up 72% of the portfolio. This heavy North American focus provides exposure to the U.S. market's growth potential but may limit diversification benefits. Expanding geographic exposure to regions like emerging markets or Europe could enhance diversification and capture growth opportunities in different economic cycles. Consider gradually increasing allocations to underrepresented regions to achieve a more balanced global portfolio, which can help reduce country-specific risks and improve long-term returns.

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.

This portfolio could be optimized using the Efficient Frontier concept, which aims to achieve the best possible risk-return ratio. By adjusting the allocation between the existing ETFs, you can potentially enhance returns without taking on additional risk. However, this optimization is limited to the current assets and doesn't account for diversification into new asset classes. Regularly reassess the portfolio's allocation to ensure it aligns with your risk tolerance and investment goals, and be open to incorporating new assets if they offer better risk-adjusted returns.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.74%

The portfolio has a total dividend yield of 1.74%, with the international ETF contributing a higher yield of 3.0%. Dividends can provide a steady income stream, which is especially valuable during periods of market volatility. Reinvesting dividends can also enhance compounding returns over time. While the current yield is modest, consider exploring additional income-generating assets, such as dividend-focused ETFs or individual stocks with a history of consistent payouts. This approach can boost overall yield and provide more reliable income for reinvestment or withdrawal needs.

Ongoing product costs Info

  • 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 0.04%, reflecting its cost efficiency. Low costs are advantageous as they leave more returns in your pocket, compounding over time. While the current costs are minimal, continue to monitor expense ratios regularly and compare them to similar investment options. If lower-cost alternatives become available, consider switching to maintain cost efficiency. Additionally, remain vigilant about other potential costs, such as transaction fees or taxes, which can also impact net returns over the long term.

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