Balanced Broadly Diversified Portfolio with Strong US Focus and Low Costs Suitable for Moderate Risk Tolerance
Report created on Dec 5, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 80.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00%
The portfolio is composed of two Vanguard ETFs, with 80% allocated to the Vanguard Total Stock Market Index Fund and 20% to the Vanguard Total International Stock Index Fund. This setup provides a broad diversification across both U.S. and international markets. The allocation leans heavily towards U.S. equities, offering exposure to a wide range of sectors. The portfolio's composition reflects a balanced investment strategy, aiming to capture growth while maintaining some degree of international diversification. This mix is well-suited for investors seeking a moderate risk profile with a focus on equity growth.
Growth
Historically, the portfolio has demonstrated impressive performance, with a compound annual growth rate (CAGR) of 12.41%. This indicates a strong return on investment over time, though it has also experienced a maximum drawdown of -34.77%, highlighting the potential volatility associated with equity-heavy portfolios. The fact that 90% of returns are concentrated in just 30 days suggests that timing can significantly impact performance. This historical data underscores the importance of a long-term investment horizon to ride out market fluctuations and capitalize on growth.
Projection
Utilizing a Monte Carlo simulation with 1,000 simulations, the portfolio's future performance was analyzed. This statistical method predicts a range of possible outcomes based on historical data and variability. The results indicate a 50th percentile end portfolio value of 243.09%, with an annualized return of 10.78%. Notably, 965 out of 1,000 simulations resulted in positive returns, highlighting the portfolio's potential for continued growth. While the projections are optimistic, they also emphasize the inherent uncertainties in investing, reinforcing the need for a diversified approach.
Asset classes
- Stocks 100%
The portfolio is predominantly invested in stocks, comprising 99.53% of the total allocation. This heavy weighting towards equities suggests a growth-oriented strategy, aiming to capitalize on market appreciation. The remaining small percentages are allocated to cash and other categories, providing minimal liquidity and diversification beyond equities. Given the limited exposure to other asset classes, the portfolio may be more susceptible to market volatility. To mitigate this risk, consider incorporating additional asset classes, such as bonds, to enhance stability and reduce overall risk.
Sectors
- Technology 27%
- Financials 15%
- Health Care 11%
- Consumer Discretionary 10%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Real Estate 3%
- Utilities 3%
Sector allocation within the portfolio is diverse, with significant exposure to technology (27.22%), financial services (14.85%), and healthcare (11.06%). This distribution reflects a balanced approach to capturing growth across various industries. However, the concentration in technology may increase vulnerability to sector-specific downturns. Diversifying further across sectors could enhance resilience against market fluctuations. Consider a more even distribution to reduce sector-specific risk and ensure a well-rounded exposure to different economic cycles and trends.
Regions
- North America 81%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily concentrated in North America, accounting for 81.18% of the allocation. While this provides strong exposure to the U.S. market, it may limit potential gains from emerging markets or other developed regions. The remaining allocation is spread across Europe, Asia, and other regions, offering some international diversification. To balance geographic risk, consider increasing exposure to underrepresented regions. This could enhance growth opportunities and reduce dependency on the U.S. market, aligning with global economic trends.
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 optimization chart suggests potential for further refinement. Moving along the efficient frontier, investors can adjust their risk-return profile. To achieve a riskier portfolio, consider increasing equity exposure or diversifying into higher-risk asset classes. Conversely, to adopt a more conservative stance, incorporate fixed income or other low-risk investments. Before optimizing, ensure a solid understanding of risk tolerance and financial goals. Focus on aligning the portfolio with these objectives, rather than chasing returns, to ensure a coherent and sustainable investment strategy.
Dividends
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Weighted yield (per year) 1.54%
The portfolio's dividend yield stands at 1.54%, with the Vanguard Total Stock Market Index Fund yielding 1.2% and the Vanguard Total International Stock Index Fund yielding 2.9%. This provides a modest income stream, complementing potential capital appreciation. While dividends can enhance total returns, they are not the primary focus of this growth-oriented portfolio. Investors seeking higher income may want to explore dividend-focused strategies or funds. However, maintaining a balance between growth and income is crucial for long-term wealth accumulation.
Ongoing product costs
- 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 benefits from low costs, with a total expense ratio (TER) of 0.04%. This is achieved through the use of Vanguard ETFs, known for their cost-effectiveness. Low fees are critical in maximizing net returns over time, as high costs can erode gains. By maintaining a low-cost structure, the portfolio is well-positioned to capture more of its gross returns. Investors should continue to prioritize cost efficiency in their investment decisions, ensuring that fees do not detract from overall performance.
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