Balanced Portfolio with Moderate Diversification and Technology Focused with High Historical Performance but Overlapping Assets

Report created on Nov 23, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio consists primarily of ETFs with a balanced risk profile, containing a mix of stocks, bonds, and real estate. Stock ETFs dominate the portfolio, making up 93% of the total allocation, while bonds and real estate have smaller allocations. This composition suggests a focus on growth with some diversification through bonds and real estate. A diversified portfolio can help mitigate risk and enhance returns over the long term. To optimize this portfolio, consider maintaining a balanced allocation while exploring other asset classes to enhance diversification.

Growth Info

Historically, the portfolio has performed well, achieving a compound annual growth rate (CAGR) of 13.81%. However, it has also experienced a significant maximum drawdown of -34.23%, indicating potential volatility. This performance suggests that while the portfolio has the potential for high returns, it also carries a level of risk that may not be suitable for all investors. To improve stability, consider strategies to reduce volatility, such as diversifying further or adjusting allocations based on risk tolerance.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio's future performance was projected, assuming a hypothetical initial investment. The simulation suggests a median return of 279.99% with an annualized return of 11.82%. The results indicate a high probability of positive returns. Monte-Carlo simulations help predict future performance by accounting for various market scenarios. It's crucial to remain aware of the range of potential outcomes and adjust the portfolio as needed to align with personal financial goals and risk tolerance.

Asset classes Info

  • Stocks
    93%
  • Bonds
    4%
  • Real Estate
    2%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 93% of the allocation, and smaller allocations to bonds and real estate. This indicates a growth-focused strategy, which may result in higher returns but also greater volatility. A well-diversified portfolio typically includes a mix of asset classes to balance risk and reward. To enhance diversification, consider increasing allocations to bonds or other asset classes to reduce risk and provide stability during market downturns.

Sectors Info

  • Technology
    37%
  • Financials
    23%
  • Industrials
    7%
  • Health Care
    7%
  • Consumer Discretionary
    5%
  • Consumer Staples
    5%
  • Real Estate
    4%
  • Telecommunications
    3%
  • Energy
    3%
  • Utilities
    2%
  • Basic Materials
    2%

The sector allocation is concentrated in technology, making up 36% of the portfolio, followed by financial services. This concentration suggests a strong focus on growth sectors but may expose the portfolio to sector-specific risks. Diversifying across multiple sectors can help mitigate these risks and provide more stable returns. Consider rebalancing the portfolio to reduce sector concentration and include a wider range of industries to achieve a more balanced sector allocation.

Regions Info

  • North America
    88%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, with 87% of the assets allocated there. This concentration may limit exposure to international markets, which can offer additional diversification benefits. A geographically diversified portfolio can help reduce risk by spreading investments across different economic regions. To improve geographic diversification, consider increasing exposure to international markets, which may provide opportunities for growth outside of North America.

Redundant positions Info

  • Vanguard Information Technology Index Fund ETF Shares
    Vanguard Dividend Appreciation Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Financials Index Fund ETF Shares
    Vanguard Small-Cap Value Index Fund ETF Shares
    Vanguard High Dividend Yield Index Fund ETF Shares
    High correlation

The portfolio contains highly correlated assets, particularly among the stock ETFs, which may reduce the benefits of diversification. Correlated assets tend to move in the same direction, which can amplify risk during market downturns. Diversification aims to include assets with low correlation to minimize risk and maximize returns. To enhance diversification, consider reducing exposure to highly correlated assets and introducing investments with lower correlation to the existing portfolio.

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 current portfolio is not fully optimized due to overlapping, highly correlated assets that limit diversification benefits. The efficient frontier concept suggests that an optimal portfolio offers the highest expected return for a given level of risk. To align with the efficient frontier, consider reducing holdings in correlated ETFs and introducing assets with lower correlation. This adjustment can enhance diversification, improve risk-adjusted returns, and bring the portfolio closer to an optimal allocation.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Small-Cap Value Index Fund ETF Shares 1.90%
  • Vanguard Financials Index Fund ETF Shares 1.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard Real Estate Index Fund ETF Shares 3.80%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.69%

The portfolio's total dividend yield is 1.69%, with the highest yields from real estate and bond ETFs. Dividends can provide a steady income stream and contribute to total returns. A higher dividend yield can be appealing for investors seeking income. To increase dividend income, consider reallocating to higher-yielding ETFs or funds. However, ensure that this aligns with the overall investment strategy and risk tolerance, as higher yields can sometimes come with increased risk.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard Financials Index Fund ETF Shares 0.10%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, which is relatively low, reflecting the cost-efficiency of the Vanguard ETFs. Keeping costs low is essential for maximizing investment returns over time. High costs can eat into returns, especially in the long run. To maintain cost-efficiency, continue selecting low-cost investment options and regularly review the portfolio's expense ratios. This approach helps ensure that a larger portion of returns is retained, contributing to long-term growth.

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