Balanced Broadly Diversified Portfolio with Strong Historic Performance and Low Costs for Moderate Risk Tolerance

Report created on Nov 28, 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, each making up 50% of the portfolio. It's a balanced mix with a focus on broad diversification, with exposure to both domestic and international markets. Such a composition typically provides a solid foundation for growth while managing risk. The equal allocation between the two ETFs reflects a strategy to capture the benefits of global market exposure. To maintain this balance, consider periodic rebalancing to ensure that market fluctuations don't skew the intended allocation.

Growth Info

Historically, this portfolio has shown a commendable performance with a compound annual growth rate (CAGR) of 10.04%. This indicates strong growth potential over time. However, the maximum drawdown of -34.41% highlights that the portfolio is not immune to market volatility. It's crucial to understand that periods of downturn are normal and should be expected. To navigate such volatility, maintaining a long-term perspective and avoiding emotional reactions to market swings is advisable.

Projection Info

Using a Monte Carlo simulation, which models potential future performance based on historical data, the portfolio shows promising results. With a hypothetical initial investment, the simulations project a median growth of 238.55% at the 50th percentile. This suggests a favorable outlook, with a high likelihood of positive returns, as indicated by 964 out of 1,000 simulations showing gains. It's important to remember that while these projections are optimistic, they are not guarantees, and diversifying further could help manage potential risks.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily allocated in stocks, making up 99.14% of the total assets. This stock-centric approach is typical for those seeking growth, but it also implies higher risk due to stock market volatility. While there is a small cash component, which can provide liquidity, the portfolio's focus remains on equities. To potentially reduce risk, consider incorporating more fixed-income assets, such as bonds, which can provide stability and income, especially during market downturns.

Sectors Info

  • Technology
    22%
  • Financials
    17%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector-wise, the portfolio is well-diversified across 11 sectors, with the largest allocations in Technology, Financial Services, and Industrials. This broad sector exposure helps mitigate risks associated with sector-specific downturns. However, sectors like Technology and Financial Services, which are more volatile, could lead to higher fluctuations in portfolio value. To manage this, regularly reviewing sector allocations and adjusting as necessary to align with market conditions and personal risk tolerance is recommended.

Regions Info

  • North America
    54%
  • Europe Developed
    19%
  • Asia Emerging
    8%
  • Japan
    8%
  • Asia Developed
    5%
  • Australasia
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, this portfolio covers a wide range of regions, with a significant focus on North America, followed by Europe and Asia. This global exposure helps in capturing growth opportunities across different markets, reducing the risk of being overly reliant on any single economy. However, geopolitical and economic events in these regions can impact performance. Staying informed about global market trends and considering geographical shifts in allocation, if necessary, can help in managing potential 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 is already well-optimized for a balanced risk profile, given its broad diversification and low costs. To achieve a riskier or more conservative stance, consider moving along the efficient frontier. Increasing stock allocation could enhance potential returns but with higher volatility. Conversely, incorporating more bonds or fixed-income assets can lead to a more conservative portfolio with lower risk. It's crucial to align any adjustments with personal financial goals and risk tolerance, ensuring the portfolio continues to meet individual needs.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.15%

The portfolio offers a moderate dividend yield of 2.15%, with the international ETF contributing a higher yield of 3.0%. Dividends provide a steady income stream, which can be reinvested to enhance total returns. This yield is a nice addition to the portfolio's growth potential, offering some level of income stability. To maximize benefits, consider enrolling in a dividend reinvestment plan (DRIP) to automatically reinvest dividends, compounding returns over time and contributing to long-term 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) 0.06%

With a total expense ratio (TER) of 0.06%, the portfolio is cost-effective, which is a significant advantage. Lower costs mean more of the investment returns are retained, contributing to overall performance. This low-cost structure is a hallmark of Vanguard funds, known for their efficiency. It's essential to keep an eye on costs, as they can eat into returns over time. Continually seeking out cost-effective investment options and minimizing unnecessary fees can further optimize portfolio performance.

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