Balanced Portfolio with Strong Diversification and Moderate Risk for Growth-Oriented Investors in USA

Report created on Nov 3, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of two broad-based ETFs: Vanguard Total Stock Market Index Fund ETF Shares, making up 70% of the portfolio, and Vanguard Total International Stock Index Fund ETF Shares, which constitutes 30%. This combination offers broad market exposure across domestic and international markets, ensuring a well-diversified investment. The portfolio's overall risk classification is balanced, with a risk score of 4 out of 7, indicating a moderate level of risk suitable for investors seeking growth with some level of stability. The diversification score is 4 out of 5, reflecting a well-spread investment across various sectors and regions.

Growth Info

If you had made a hypothetical initial investment, the portfolio's historical performance shows a Compound Annual Growth Rate (CAGR) of 11.35%. This impressive growth rate highlights the portfolio's ability to generate substantial returns over time. However, it also experienced a maximum drawdown of -34.61%, indicating periods of significant decline. The fact that 90% of returns were generated in just 27 days underscores the importance of staying invested to capture these critical periods. This performance suggests a robust potential for long-term growth, but investors should be prepared for potential volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 scenarios, we project potential future outcomes for a hypothetical initial investment. The simulation shows a wide range of possible end values, with the 5th percentile at 3.58% and the 67th percentile at 340.25%. The median (50th percentile) projection is 223.6%, indicating a favorable chance of significant portfolio growth. With 957 out of 1,000 simulations resulting in positive returns, the annualized return across all simulations is 10.31%. This suggests a promising outlook, but investors should remain aware of the inherent uncertainties and potential variations in future performance.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.4% of assets in this class, complemented by minimal allocations in cash and other categories. This strong focus on equities aligns with the goal of achieving long-term capital appreciation. While this concentration can drive growth, it also introduces higher volatility. For investors seeking a more balanced risk profile, it might be beneficial to consider adding exposure to other asset classes, such as bonds, to reduce overall portfolio volatility and provide a buffer during market downturns.

Sectors Info

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

The sector allocation within the portfolio is diverse, with significant exposure to Technology (25.44%), Financial Services (15.58%), and Healthcare (10.83%). These sectors are known for their growth potential and resilience in various market conditions. However, the concentration in these top sectors may increase risk if they experience downturns. To mitigate this, investors should consider periodically reviewing sector allocations to ensure alignment with their risk tolerance and market outlook. A well-rounded sector distribution can help in balancing potential risks and rewards over time.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, accounting for 72% of the allocation. This strong emphasis on the domestic market reflects an expectation of continued growth in the region. Additionally, the portfolio includes exposure to Europe, Asia, and other regions, offering a degree of international diversification. While this geographic spread enhances diversification, it also exposes the portfolio to global economic and political risks. To maintain a balanced approach, investors may wish to periodically assess and adjust geographic allocations in response to changing market dynamics and personal investment goals.

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, offering a balance of growth potential and diversification. However, investors can explore moving along the efficient frontier to adjust their risk profile. For those seeking higher returns, increasing exposure to equities or growth sectors may be considered, while those looking for more stability might allocate more to bonds or defensive sectors. The current allocation provides a solid foundation, but regular reviews and adjustments can help ensure the portfolio remains aligned with changing risk appetites and financial goals. Prioritizing diversification and cost efficiency will further optimize long-term performance.

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) 1.81%

The portfolio offers a combined dividend yield of 1.81%, with the Vanguard Total Stock Market Index Fund ETF Shares yielding 1.3% and the Vanguard Total International Stock Index Fund ETF Shares yielding 3.0%. This provides a modest income stream, which can be appealing for investors seeking regular cash flow. While dividends contribute to total returns, they should not be the sole focus for growth-oriented investors. Reinvesting dividends can enhance compounding effects over time, potentially boosting long-term portfolio performance. Investors should consider their income needs and reinvestment strategy to optimize returns.

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) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, reflecting the cost-efficient nature of the chosen Vanguard ETFs. This low-cost structure is advantageous for investors, as it helps to maximize net returns over time. Keeping investment costs minimal is a key principle of successful investing, as high fees can significantly erode gains. Investors should continue to prioritize low-cost options and regularly review their investment expenses to ensure they remain aligned with their financial goals. Maintaining a focus on cost efficiency can significantly enhance overall portfolio performance.

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