A broadly diversified balanced portfolio with a focus on large-cap US equities

Report created on Jan 13, 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 consists of three major ETFs: the Vanguard S&P 500 ETF at 60%, the Vanguard Total International Stock Index Fund ETF at 20%, and the Utilities Select Sector SPDR® Fund also at 20%. With a heavy weighting towards US large-cap stocks, it mirrors a common benchmark for balanced portfolios. While the allocation to international stocks and utilities adds diversification, the portfolio remains heavily skewed towards the US market. To align more closely with global benchmarks, consider increasing exposure to international markets, which might offer different growth opportunities and risks.

Growth Info

Historically, the portfolio has demonstrated a strong Compound Annual Growth Rate (CAGR) of 11.52%, indicating robust past performance. However, it also experienced a maximum drawdown of -34.15%, highlighting potential volatility. Compared to benchmarks, this performance suggests a solid return but with notable risk during downturns. While past performance can offer insights, remember that it doesn't guarantee future results. To manage potential volatility, consider strategies such as rebalancing or incorporating assets with lower correlations to the existing holdings.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with a median return of 219.37%. The simulation, which uses historical data to forecast future possibilities, suggests a high likelihood of positive returns. However, it's important to note that these are estimates and actual future performance can vary. Given the projected outcomes, maintaining a diversified approach and periodically reviewing the portfolio can help navigate uncertainties. Diversifying further across asset classes might also cushion against unexpected market shifts.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, comprising over 99% of the allocation, with negligible exposure to cash or other asset classes. This concentration in equities can drive growth but also exposes the portfolio to market volatility. Compared to typical balanced portfolios, which often include bonds or other fixed-income securities, this allocation may lack stability. Consider introducing fixed-income assets to potentially reduce volatility and provide a buffer during market downturns, aligning more closely with a balanced risk profile.

Sectors Info

  • Technology
    22%
  • Utilities
    22%
  • Financials
    12%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    2%

Sector allocation is diverse, with a significant concentration in technology (22.44%) and utilities (22.24%). This reflects a strong tilt towards sectors known for both growth and stability. However, the portfolio's reliance on these sectors could lead to heightened volatility if these areas experience downturns. Aligning sector weights more closely with broader benchmarks could enhance diversification. Adding exposure to underweighted sectors like real estate or energy might provide balance and capitalize on different economic cycles, reducing dependency on a few sectors.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic exposure is predominantly in North America (81.25%), with limited allocations to other regions. While this provides stability through exposure to a mature market, it also limits potential growth from emerging economies. Compared to global benchmarks, this allocation is heavily skewed towards the US, potentially missing out on international opportunities. To enhance geographic diversification, consider increasing exposure to regions like Asia or Europe, which could offer growth and help mitigate risks tied to a single market.

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 appears well-positioned on the Efficient Frontier, suggesting a favorable risk-return balance given its current asset mix. The Efficient Frontier represents the optimal combination of risk and return for a given set of investments. This alignment indicates that the portfolio is effectively utilizing its assets to achieve the best possible returns for its risk level. While further optimization might be possible, the current structure is commendably efficient. Regularly reviewing asset allocations can ensure continued alignment with the investor's goals and risk tolerance.

Dividends Info

  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Utilities Select Sector SPDR® Fund 3.00%
  • Weighted yield (per year) 2.06%

With a total dividend yield of 2.06%, the portfolio provides a modest income stream. The Vanguard Total International Stock Index Fund ETF and Utilities Select Sector SPDR® Fund contribute higher yields, enhancing income potential. Dividend income can be a valuable component for investors seeking regular cash flow. However, relying heavily on dividends might limit growth potential. If income is a priority, consider increasing allocations to high-yield sectors or funds. For growth-focused investors, reinvesting dividends could further compound returns over time.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Utilities Select Sector SPDR® Fund 0.09%
  • Weighted costs total (per year) 0.05%

The portfolio boasts a low total expense ratio (TER) of 0.05%, which is exceptionally cost-effective. Low costs are crucial for maximizing long-term returns, as they minimize the drag on performance. Compared to typical expense ratios, this is highly favorable, ensuring more of the investment returns stay in your pocket. Maintaining this low-cost structure is advantageous, but it’s still worth periodically reviewing whether even lower-cost options are available. Cost efficiency is a key strength of this portfolio, supporting its long-term growth potential.

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