Balanced portfolio with strong U.S. focus and moderate risk designed for long-term growth
Report created on Jan 31, 2025Risk profile
4/7
Diversification profile
3/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 69.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 26.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 5.00%
This portfolio is primarily composed of U.S. stocks (69%) and bonds (26%), with a small international stock exposure (5%). Such a composition suggests a tilt towards growth, leveraging the historical performance of U.S. markets. The bond allocation adds stability, reducing overall volatility. A typical benchmark might have a more diverse international component, so consider whether this emphasis aligns with your goals. To enhance diversification, you might explore increasing international exposure, especially in emerging markets, which could provide additional growth opportunities.
Growth
Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 10.30%, outperforming many traditional balanced benchmarks. This indicates effective asset allocation, particularly with the U.S. stock market's robust performance. However, the maximum drawdown of -28.75% highlights potential vulnerability during market downturns. It's essential to balance risk and reward, especially if your investment horizon is shorter. Regularly reviewing performance against benchmarks ensures the portfolio continues to meet your expectations and risk tolerance.
Projection
Monte Carlo simulations, which use historical data to predict future outcomes, suggest a median portfolio growth of 145.8% over the investment horizon. While 943 out of 1,000 simulations show positive returns, indicating a generally optimistic outlook, remember that these are projections based on past data and not guarantees. The 5th percentile shows a potential decline of -4.2%, emphasizing the need for caution. Regularly reviewing projections helps adjust strategies in response to changing market conditions, ensuring alignment with your long-term goals.
Asset classes
- Stocks 74%
- Bonds 26%
- Cash 1%
The portfolio is well-diversified across two primary asset classes: stocks (74%) and bonds (26%). This balance is typical for a moderately diversified portfolio aiming for growth while managing risk. Stocks drive long-term growth, while bonds provide stability and income. Compared to benchmarks, this allocation is balanced, though increasing bonds could further reduce volatility. Consider your risk tolerance and time horizon when adjusting the asset mix. Maintaining a diverse range of asset classes helps mitigate risks associated with market fluctuations.
Sectors
- Technology 23%
- Financials 10%
- Consumer Discretionary 8%
- Health Care 8%
- Industrials 7%
- Telecommunications 6%
- Consumer Staples 4%
- Energy 3%
- Real Estate 2%
- Utilities 2%
- Basic Materials 2%
Sector allocation is tech-heavy, with 23% in technology, potentially increasing volatility during interest rate hikes. Other sectors like financial services (10%) and consumer cyclicals (8%) provide balance. This composition aligns with common benchmarks, ensuring sectoral diversification. However, consider whether the tech concentration matches your risk appetite. Diversifying into underrepresented sectors, like utilities or basic materials, might reduce volatility and enhance stability. Regularly reviewing sector performance helps maintain a balanced risk-return profile.
Regions
- North America 69%
- Europe Developed 2%
- Asia Emerging 1%
- Japan 1%
- Asia Developed 1%
The portfolio is predominantly U.S.-focused (69%), with limited international exposure. This concentration can limit diversification and increase vulnerability to U.S. market-specific risks. While the U.S. has historically outperformed, global diversification, especially in emerging markets, could reduce risk and enhance returns. Consider whether your geographic allocation aligns with your risk tolerance and investment goals. Exploring opportunities in underrepresented regions might provide growth potential and reduce dependency on a single market.
Market capitalization
- Mega-cap 30%
- Large-cap 23%
- Mid-cap 14%
- Small-cap 5%
- Micro-cap 2%
The portfolio's market capitalization is well-distributed, with a focus on mega (30%) and big (23%) companies, ensuring stability and growth potential. Smaller market caps, like small (5%) and micro (2%), add diversification but may increase volatility. This balance aligns with typical benchmarks, providing a mix of growth and stability. Consider your risk tolerance when adjusting market cap exposure. Increasing small-cap exposure could enhance growth, while a focus on larger caps might reduce risk. Regularly reviewing market cap distribution ensures alignment with your 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's risk-return profile can be optimized using the Efficient Frontier, a method to achieve the best possible risk-return ratio. This involves adjusting asset weights to maximize return for a given risk level. While the current allocation is balanced, slight adjustments could enhance efficiency. Regularly reviewing optimization opportunities ensures the portfolio remains aligned with your risk tolerance and investment goals. Consider professional advice for optimization, ensuring decisions align with your financial objectives.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.60%
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 3.30%
- Weighted yield (per year) 1.93%
With a total dividend yield of 1.93%, the portfolio provides a moderate income stream, supplementing capital gains. Dividends contribute to total returns, especially in low-growth environments. The bond ETF's 3.60% yield enhances income, while the stock ETFs offer growth potential. This balance aligns with a growth-focused strategy, providing income without sacrificing growth. Regularly reviewing dividend yields ensures they meet your income needs. Consider increasing dividend-focused assets if income generation becomes a priority.
Ongoing product costs
- Vanguard Total Bond Market Index Fund ETF Shares 0.03%
- 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) 0.03%
The portfolio benefits from low costs, with a total expense ratio (TER) of 0.03%, supporting long-term performance. Low costs mean more of your returns stay invested, compounding over time. Compared to typical benchmarks, these costs are impressively low, enhancing net returns. Maintaining low-cost investments helps maximize returns, especially in volatile markets. Regularly reviewing costs ensures they remain competitive. Consider cost-effective alternatives if expenses rise, to protect long-term growth.
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