A balanced portfolio with strong US focus and low-cost ETFs

Report created on Dec 21, 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 is heavily weighted towards the Vanguard S&P 500 ETF, comprising 80% of the allocation, with the remaining 20% in the Vanguard Total International Stock Index Fund ETF. Such a composition leans heavily on US equities, reflecting a common benchmark strategy. The portfolio's balanced risk classification indicates a moderate approach to risk, which aligns with the substantial allocation to a broad market index like the S&P 500. While this structure offers strong exposure to large-cap US stocks, it may benefit from additional diversification, particularly in terms of asset classes beyond equities.

Growth Info

The historical performance of this portfolio shows a Compound Annual Growth Rate (CAGR) of 12.38%, which is impressive and suggests strong past returns. However, it also experienced a maximum drawdown of -33.88%, indicating significant volatility during market downturns. Comparing this to common benchmarks, the portfolio aligns well with typical S&P 500 performance trends. While past performance is a valuable indicator, it is important to remember that it does not guarantee future results. Maintaining awareness of market conditions and adapting to changes can help manage risks effectively.

Projection Info

The Monte Carlo simulation, which uses historical data to estimate future performance, shows a median portfolio value increase of 244.35% over a specified period. With 966 out of 1,000 simulations yielding positive returns, the probability of achieving gains appears high. However, potential outcomes vary widely, as indicated by the 5th and 67th percentiles. This variability underscores the importance of understanding that simulations are based on historical trends and assumptions, which may not fully capture future market conditions. Regularly reviewing and adjusting the portfolio can help align it with changing financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible allocation to cash and other asset classes. This concentration in equities provides a high potential for growth, but also exposes the portfolio to stock market volatility. Comparing this to benchmark norms, which often include bonds or other asset classes, suggests a less diversified approach. To enhance diversification, consider incorporating additional asset classes such as bonds or real estate, which can provide stability and reduce overall portfolio risk. Diversifying across asset classes can help achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    29%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation is dominated by technology at 29%, followed by financial services and healthcare. This sectoral distribution mirrors the composition of the S&P 500, indicating alignment with common benchmarks. However, the heavy tech concentration might lead to increased volatility, especially during periods of interest rate changes or tech sector downturns. To mitigate potential risks, consider rebalancing to achieve a more even sector distribution. Monitoring sector trends and adjusting allocations can help maintain a balanced portfolio that is resilient to market shifts and sector-specific risks.

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 heavily weighted towards North America, accounting for over 81% of the allocation. This focus aligns with the US-centric nature of the S&P 500. However, it results in limited exposure to international markets, which can provide diversification benefits. Comparatively, benchmark allocations may include a broader range of regions. To enhance geographical diversification, consider increasing allocations to underrepresented regions such as emerging markets or Europe. This can help mitigate regional risks and take advantage of growth opportunities in diverse global markets.

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 current asset allocation could be optimized using the Efficient Frontier, a concept that helps identify the best possible risk-return ratio. By adjusting the weights of existing assets, the portfolio can potentially achieve higher returns for the same level of risk or maintain current returns with reduced risk. This optimization focuses on the existing assets, ensuring that the portfolio remains aligned with the investor's objectives. Regularly reviewing and rebalancing the portfolio can help maintain its efficiency and adapt to changing market conditions and personal financial goals.

Dividends Info

  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.04%

With a total dividend yield of 1.04%, the portfolio provides a modest income stream. The Vanguard S&P 500 ETF offers a 0.9% yield, while the Vanguard Total International Stock Index Fund ETF contributes 1.6%. Dividend income can enhance total returns, especially in low-growth environments. For investors seeking higher income, exploring additional dividend-focused investments could be beneficial. However, it's important to balance the pursuit of yield with the overall growth and risk objectives of the portfolio, ensuring a comprehensive approach to income generation.

Ongoing product costs Info

  • 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 benefits from impressively low costs, with a Total Expense Ratio (TER) of 0.04%. This low-cost structure supports better long-term performance by minimizing fees that can erode returns. The Vanguard S&P 500 ETF and Vanguard Total International Stock Index Fund ETF have expense ratios of 0.03% and 0.08% respectively, which are among the lowest in the industry. Maintaining low costs is a key advantage, allowing more of the portfolio's returns to be retained by the investor. Continuing to prioritize low-cost investments can contribute to achieving financial goals more efficiently.

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