A balanced portfolio with strong diversification and low costs for moderate risk tolerance

Report created on Mar 10, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three key ETFs: Vanguard S&P 500 ETF (60%), Vanguard Total Bond Market Index Fund ETF Shares (20%), and Vanguard Total International Stock Index Fund ETF Shares (20%). This allocation leans heavily on U.S. equities but balances risk with bonds and international stocks. A benchmark comparison suggests a typical balanced portfolio, with a strong emphasis on equities for growth while maintaining a bond allocation for stability. This structure is well-suited for investors seeking a moderate risk approach with a focus on growth and income.

Growth Info

Historically, the portfolio has performed well, achieving a CAGR of 9.97%. This figure reflects the average annual growth rate, akin to measuring a car's speed over a journey. Compared to benchmarks, this performance is robust, although the maximum drawdown of -29.05% indicates potential volatility during market downturns. Such historical data can guide expectations but does not guarantee future outcomes. Regular performance reviews can help ensure alignment with financial goals.

Projection Info

Using Monte Carlo simulation, which models potential future outcomes based on historical data, the portfolio's projected annualized return is 7.82%. This method provides a range of possible outcomes, with a 5th percentile end value of 1.4% and a 67th percentile of 228%, highlighting the inherent uncertainty in forecasting. While these projections offer valuable insights, they should be interpreted cautiously, as they rely on past data and assumptions that may not hold in future market conditions.

Asset classes Info

  • Stocks
    79%
  • Bonds
    20%
  • Cash
    1%

The portfolio's asset allocation includes 79% stocks and 20% bonds, with a small cash position. This mix supports diversification, reducing risk by spreading investments across different asset types. Compared to benchmark norms, the stock-heavy allocation suggests a growth-oriented strategy, while the bond component provides stability. Maintaining this balance can help mitigate volatility while capturing growth opportunities, aligning with a moderate risk tolerance.

Sectors Info

  • Technology
    23%
  • Financials
    12%
  • Consumer Discretionary
    9%
  • Health Care
    8%
  • Industrials
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is diversified across various sectors, with technology (23%) and financial services (12%) leading the way. This sectoral allocation aligns well with common benchmarks, providing a balanced exposure to different economic segments. However, the tech-heavy focus could introduce volatility, especially during interest rate changes. Regularly reviewing sector trends can help ensure the portfolio remains aligned with market conditions and personal risk preferences.

Regions Info

  • North America
    61%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America (61%), with additional exposure to Europe and Asia. This distribution supports diversification, though the heavy U.S. focus may limit benefits from global growth. Comparing this allocation to benchmarks reveals a typical U.S.-centric bias. Investors might consider increasing exposure to emerging markets to enhance diversification and capture potential growth in less mature economies.

Market capitalization Info

  • Mega-cap
    37%
  • Large-cap
    27%
  • Mid-cap
    14%
  • Small-cap
    1%

The portfolio's market capitalization distribution is skewed towards mega and large-cap stocks, comprising 64% of the total. This focus on larger companies offers stability and lower volatility, as these firms are typically well-established. However, the limited exposure to small and micro-cap stocks may restrict growth potential. Balancing market cap exposures can enhance diversification and provide opportunities for higher returns from smaller, potentially faster-growing companies.

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's risk-return profile can be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio for a given set of assets. This optimization focuses on reallocating existing assets to achieve the most efficient balance between risk and return, rather than diversifying further. While this approach enhances efficiency, it may not align with other goals, such as maximizing income or capital preservation.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.10%
  • Weighted yield (per year) 2.14%

The portfolio's dividend yield stands at 2.14%, contributing to overall returns. Dividends provide a steady income stream, crucial for investors seeking regular cash flow. The bond ETF offers the highest yield at 3.70%, while the international stock ETF yields 3.10%. This income component can buffer against market volatility, supporting a balanced approach. Investors should consider reinvesting dividends to enhance long-term growth potential.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard S&P 500 ETF 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 minimal costs associated with maintaining these ETFs. Low costs are advantageous as they enhance net returns over time, ensuring more of the investment's growth is retained by the investor. This cost efficiency aligns with best practices and supports better long-term performance, making it a key strength of the portfolio.

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