A cautious yet diversified portfolio with low costs and moderate risk exposure
Report created on Dec 26, 2024Risk profile
3/7
Diversification profile
5/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 40.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 30.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00% -
BN Vanguard Total International Bond Index Fund ETF Shares
BNDX - US92203J4076 10.00%
This portfolio is composed of four main ETFs, with a heavy focus on equities and bonds. The Vanguard Total Stock Market Index Fund ETF represents 40% of the portfolio, while the Vanguard Total Bond Market Index Fund ETF comprises 30%. Additionally, there is a 20% allocation to the Vanguard Total International Stock Index Fund ETF and a 10% allocation to the Vanguard Total International Bond Index Fund ETF. This composition is well-balanced for a cautious investor, providing exposure to both domestic and international markets. Consider periodically reviewing asset allocations to ensure they align with your risk tolerance and financial goals.
Growth
The portfolio's historical performance shows a Compound Annual Growth Rate (CAGR) of 7.34%, with a maximum drawdown of -23.81%. This indicates a relatively stable growth trend with some volatility. Comparing this to common benchmarks, the performance aligns well with typical market returns for a diversified portfolio. Remember, past performance does not guarantee future results, but it can offer insights into how the portfolio might behave under similar market conditions.
Projection
Using Monte Carlo simulations, which project potential future outcomes based on historical data, the portfolio shows a median outcome of 100.81% and an annualized return of 5.77%. While 921 out of 1,000 simulations resulted in positive returns, it is important to note that simulated data has limitations and should not be solely relied upon for future predictions. Regularly reassessing your portfolio's performance and adjusting as necessary can help manage expectations and risks.
Asset classes
- Stocks 60%
- Bonds 39%
- Cash 1%
The portfolio is primarily allocated between stocks (59.5%) and bonds (39.3%), with minimal exposure to cash and other asset classes. This allocation provides a good balance between growth potential and income stability, which is ideal for a cautious investor. The lack of significant exposure to alternative asset classes may limit potential diversification benefits, so consider exploring additional asset classes if your risk tolerance allows.
Sectors
- Technology 15%
- Financials 10%
- Industrials 7%
- Health Care 6%
- Consumer Discretionary 6%
- Telecommunications 5%
- Consumer Staples 3%
- Energy 2%
- Basic Materials 2%
- Real Estate 2%
- Utilities 2%
Sector allocation is fairly balanced, with technology at 14.9% and financial services at 9.6%, followed by industrials and healthcare. This diversification across sectors aligns with common benchmarks, reducing sector-specific risks. However, be aware that tech-heavy portfolios may experience higher volatility during interest rate hikes. Regularly reviewing sector weights can help maintain a balanced approach and adapt to changing market conditions.
Regions
- North America 41%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographic exposure is predominantly in North America (41.4%), with smaller allocations to Europe, Asia, and other regions. This reflects a home-country bias typical for U.S.-based investors. While this provides stability, it may limit exposure to growth opportunities in emerging markets. Consider whether increasing international exposure aligns with your investment goals, balancing potential growth with the associated risks.
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 seeks the best possible risk-return ratio given the current asset allocation. This involves adjusting the weights of existing assets to maximize returns for a given level of risk. While the portfolio is already well-diversified, exploring optimization techniques can help fine-tune performance. Remember, efficiency focuses on risk-return balance, not necessarily diversification or other goals.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.30%
- Vanguard Total International Bond Index Fund ETF Shares 2.10%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 3.30%
- Weighted yield (per year) 2.34%
The portfolio's average dividend yield stands at 2.34%, with contributions from both stock and bond ETFs. This yield provides a steady income stream, which is beneficial for investors seeking regular cash flow. Dividend-paying investments can also offer a cushion against market volatility. Ensure that the dividend yield aligns with your income needs and reinvest dividends to maximize compound growth if additional income is not required.
Ongoing product costs
- Vanguard Total Bond Market Index Fund ETF Shares 0.03%
- Vanguard Total International Bond Index Fund ETF Shares 0.07%
- 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 selection of Vanguard ETFs. Low costs enhance long-term returns by minimizing the drag on performance. This cost efficiency is a significant advantage and aligns with best practices for portfolio management. Continue to monitor fees and explore opportunities to further reduce costs if possible, while maintaining the desired level of diversification and risk.
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