A balanced portfolio with strong diversification across global equities and bonds

Report created on Dec 18, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of three main ETFs: Vanguard Total Stock Market Index Fund, Vanguard Total International Stock Index Fund, and Vanguard Total Bond Market Index Fund. The allocation is heavily weighted towards stocks, accounting for approximately 75% of the portfolio, with the remaining 25% in bonds. This structure aims to balance growth potential with income stability. A diversified mix of domestic and international stocks, coupled with a substantial bond component, provides a solid foundation for risk management. To enhance growth, consider slightly increasing exposure to equities while maintaining a bond allocation that aligns with your risk tolerance.

Growth Info

Historically, the portfolio has achieved a compound annual growth rate (CAGR) of 8.22%, showcasing its ability to generate consistent returns over time. However, it has also experienced a maximum drawdown of -27.77%, indicating potential volatility in adverse market conditions. Past performance provides insight into how the portfolio might react to market fluctuations, but it does not guarantee future results. To mitigate future drawdowns, consider diversifying further within asset classes or incorporating alternative investments that may provide additional stability.

Projection Info

The Monte Carlo simulation, which ran 1,000 scenarios, projects a wide range of potential outcomes for this portfolio. It uses historical data to simulate future performance, suggesting a 50th percentile outcome of 151.72% growth and a 67th percentile outcome of 210.65%. These projections indicate a strong likelihood of positive returns, with 945 simulations resulting in gains. While useful, these projections are based on historical trends and assumptions, which may not fully capture future market dynamics. Regularly reviewing and adjusting the portfolio can help align it with changing market conditions.

Asset classes Info

  • Stocks
    74%
  • Bonds
    25%
  • Cash
    1%

The portfolio's allocation across asset classes is predominantly in stocks (approximately 74%) and bonds (about 25%), with minimal exposure to cash and other assets. This allocation supports a balanced approach, offering growth through equities and income through bonds. Diversification across asset classes can help reduce risk, as different assets often react differently to market events. To optimize risk-adjusted returns, consider periodically rebalancing the portfolio to maintain the desired allocation and ensure alignment with your investment objectives.

Sectors Info

  • Technology
    17%
  • Financials
    13%
  • Industrials
    9%
  • Consumer Discretionary
    8%
  • Health Care
    8%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Basic Materials
    3%
  • Energy
    3%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation within the portfolio is well-distributed, with notable exposure to technology, financial services, and industrials. Technology leads with a 17% allocation, reflecting its growth potential, while financial services and industrials provide stability and diversification. This sectoral balance helps mitigate risks associated with over-concentration in any single industry. To further enhance diversification, consider increasing exposure to underrepresented sectors, such as utilities or consumer defensive, which may offer resilience during economic downturns.

Regions Info

  • North America
    43%
  • Europe Developed
    13%
  • Asia Emerging
    6%
  • Japan
    5%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is diversified, with significant exposure to North America (43%) and Europe (13%), alongside smaller allocations to Asia, Japan, and other regions. This geographic spread helps mitigate risks associated with regional economic fluctuations and political events. However, the portfolio's limited exposure to emerging markets may restrict its growth potential. To capitalize on global opportunities, consider gradually increasing exposure to emerging markets, which may offer higher growth prospects over the long term.

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.

Portfolio optimization using the Efficient Frontier suggests potential for improved risk-return balance by adjusting asset weights. This process identifies the optimal allocation that maximizes returns for a given level of risk. While the current allocation is balanced, slight adjustments, such as increasing bond exposure or diversifying stock holdings, could enhance efficiency. Regularly reassessing the portfolio's position on the Efficient Frontier can help ensure it remains aligned with your evolving risk tolerance and return expectations.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.94%

The portfolio's dividend yield stands at 1.94%, primarily driven by the bond ETF's 3.6% yield, complemented by stock ETFs yielding 1.2% and 1.6%. Dividends contribute to total returns and provide a steady income stream, particularly in volatile markets. Reinvesting dividends can enhance compounding effects over time, boosting long-term growth. To increase income potential, consider allocating more to dividend-focused investments or exploring high-yield bond options, ensuring alignment with your risk tolerance and income needs.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • 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) 0.05%

With a total expense ratio (TER) of 0.05%, this portfolio is cost-effective, minimizing the drag on returns due to fees. Low costs are crucial for maximizing long-term growth, as they compound over time. Vanguard's ETFs are known for their competitive fees, which contribute to this portfolio's efficiency. To maintain cost-effectiveness, regularly review and compare fees across similar investment products and consider swapping higher-cost funds for lower-cost alternatives without compromising on diversification or quality.

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