A balanced portfolio with strong U.S. focus and low-cost index fund exposure

Report created on Jan 22, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed of two Vanguard ETFs, with 65% in the Total Stock Market Index Fund and 35% in the Total International Stock Index Fund. This composition provides a broad exposure to global equities, with a significant emphasis on U.S. markets. Compared to a typical balanced benchmark, this portfolio leans heavily on equities, which can offer higher growth potential but also increased volatility. A diversified mix of asset types, such as bonds, could be considered to align with a more traditional balanced approach, potentially reducing risk while maintaining growth opportunities.

Growth Info

Historically, this portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 11.22%, indicating robust growth over time. The maximum drawdown of -34.53% highlights potential risks during market downturns. Compared to benchmarks, the performance has been impressive, though it's essential to remember that past results don't guarantee future outcomes. Evaluating performance against personal goals and risk tolerance is crucial. Consider setting up regular reviews of performance against benchmarks to ensure the portfolio remains aligned with your objectives.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a wide range of potential returns. With a 50th percentile projection of 250.3% and a 5th percentile of 14.9%, the portfolio shows a high likelihood of positive returns, as 970 out of 1,000 simulations were profitable. However, it's important to note that these projections are not guarantees. Regularly revisiting your portfolio's alignment with your financial goals and risk tolerance can help you make informed decisions amidst market changes.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99% in equities and just 1% in cash. While this allocation can drive growth, it also increases exposure to market volatility. Compared to a balanced benchmark, this portfolio is more aggressive. Diversifying into other asset classes like bonds or real estate could offer stability and reduce risk. This diversification can help manage volatility and provide a buffer during market downturns, aligning with a balanced investment strategy.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation shows a significant concentration in technology at 25%, followed by financial services and consumer cyclicals. This distribution is fairly aligned with global benchmarks, though the tech-heavy tilt may lead to higher volatility, especially during periods of interest rate changes. Balancing sector exposure by increasing allocations to more defensive sectors, like utilities or consumer staples, could enhance stability. This adjustment could help mitigate risks associated with sector-specific downturns.

Regions Info

  • North America
    68%
  • Europe Developed
    13%
  • Asia Emerging
    6%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

With 68% of assets in North America, the portfolio is heavily skewed towards U.S. markets. While this reflects a common trend among U.S.-based investors, it may limit exposure to growth opportunities in emerging markets. Compared to global benchmarks, increasing the allocation to regions like Asia or Latin America could enhance diversification and potentially capture higher growth. A more balanced geographic allocation can reduce regional risks and improve long-term resilience.

Market capitalization Info

  • Mega-cap
    42%
  • Large-cap
    31%
  • Mid-cap
    19%
  • Small-cap
    5%
  • Micro-cap
    2%

The portfolio features a strong tilt towards large-cap stocks, with 42% in mega and 31% in big caps. This focus can provide stability and lower volatility, as large companies often have more predictable earnings. However, the limited exposure to small and micro-cap stocks may miss out on higher growth potential. Balancing market cap exposure by slightly increasing smaller-cap allocations could capture more aggressive growth, though it would also introduce additional risk.

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.

While this portfolio is well-diversified across global equities, it might benefit from exploring the Efficient Frontier concept. This involves optimizing the risk-return ratio by adjusting the allocation between existing assets. This process doesn't necessarily mean adding new assets but rather fine-tuning existing ones to achieve the best possible balance between risk and return. Regularly reviewing and rebalancing the portfolio can ensure it remains on the optimal path for your financial goals.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.94%

The portfolio's overall dividend yield is 1.94%, with the international ETF contributing a higher yield. Dividends can provide a steady income stream, which is beneficial for investors seeking income alongside growth. While the yield is modest, reinvesting dividends can significantly enhance long-term returns through compounding. Consider whether your investment goals prioritize income, and if so, explore higher-yielding options to boost income potential without sacrificing growth.

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) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, thanks to the Vanguard ETFs' cost efficiency. Low costs are a significant advantage, as they contribute to better net returns over time. Compared to industry averages, this portfolio is well-positioned in terms of cost efficiency. Maintaining this cost structure supports long-term growth, as even small reductions in fees can have a substantial impact on compounding returns.

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