Cautious Highly Diversified Portfolio with Solid Historical Performance and Low Costs for Risk-Averse Investors

Report created on Nov 23, 2024

Risk profile Info

3/7
Cautious
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of four ETFs, with a strong emphasis on stocks and bonds. It holds 40% in the Vanguard Total Stock Market Index Fund ETF, 30% in the Vanguard Total Bond Market Index Fund ETF, 20% in the Vanguard Total International Stock Index Fund ETF, and 10% in the SPDR® Bloomberg 1-3 Month T-Bill ETF. This allocation shows a balanced approach between equities and fixed income, ensuring stability while capturing potential growth. The inclusion of international stocks provides global exposure, further enhancing diversification. This composition reflects a cautious investment strategy, suitable for those seeking moderate growth with limited risk.

Growth Info

The historical performance of this portfolio reveals a respectable CAGR of 7.27%, indicating steady growth over time. The maximum drawdown of -23.72% suggests some vulnerability during market downturns, but this is relatively moderate given the diversified nature of the portfolio. The fact that 90% of returns are concentrated in just 30 days highlights the importance of staying invested to capture these key growth periods. Overall, the historical performance suggests a reliable track record, providing confidence for long-term investors who value consistency and moderate risk.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the forward projection for this portfolio shows an annualized return of 5.68%. This simulation provides a range of potential outcomes by modeling future performance based on historical data. The 5th percentile indicates a potential downside of -13.42%, while the median (50th percentile) projects a 101.57% return. The 67th percentile suggests a more optimistic scenario with a 145.16% return. With 916 simulations yielding positive returns, the portfolio's outlook appears promising, though it remains essential to consider individual risk tolerance when interpreting these results.

Asset classes Info

  • Stocks
    60%
  • Bonds
    30%
  • Cash
    11%

This portfolio is well-diversified across three main asset classes: stocks (59.61%), bonds (29.66%), and cash (10.69%). This allocation reflects a balanced strategy, providing growth potential through equities while maintaining stability with fixed income. The cash position offers liquidity and serves as a buffer against market volatility. The small allocation to other and unclassified assets is negligible, ensuring a focus on traditional asset classes. This composition is suitable for investors who appreciate a mix of growth and income, reducing risk through diversification across asset classes.

Sectors Info

  • Technology
    15%
  • Financials
    9%
  • Industrials
    7%
  • Health Care
    6%
  • Consumer Discretionary
    6%
  • Telecommunications
    4%
  • Consumer Staples
    4%
  • Energy
    2%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation within this portfolio is diverse, with the largest exposure in Technology (14.91%), followed by Financial Services (9.49%) and Industrials (6.58%). This spread across multiple sectors reduces the risk associated with any single industry, providing resilience against sector-specific downturns. The presence of Consumer Cyclicals, Healthcare, and Communication Services further enhances diversification. While Real Estate and Utilities have lower allocations, they contribute to a well-rounded portfolio. This sector distribution supports a cautious investment approach, balancing growth sectors with defensive ones to achieve stability.

Regions Info

  • North America
    41%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America (41.37%), with additional exposure to Europe Developed (7.86%) and Asia Emerging (3.29%). This allocation provides a solid foundation in stable, developed markets while capturing growth potential in emerging regions. The inclusion of Japan, Asia Developed, and Australasia further diversifies geographic risk. Although Africa/Middle East and Latin America have minimal representation, they add a touch of diversity. This geographic composition aligns with a cautious investment strategy, ensuring stability while allowing for global growth opportunities.

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 currently positioned close to the efficient frontier, indicating an efficient risk-return balance. However, it is not the optimal portfolio, as the optimal one offers a higher expected return of 13.59% with a risk level of 18.00%. To optimize, consider adjusting the risk level according to personal preferences, which may involve reallocating assets to achieve a desired balance between risk and return. Understanding the efficient frontier helps in making informed decisions about potential adjustments, ensuring alignment with individual financial goals and risk tolerance.

Dividends Info

  • SPDR® Bloomberg 1-3 Month T-Bill ETF 5.10%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.71%

The portfolio offers a total dividend yield of 2.71%, providing a steady income stream for investors. The SPDR® Bloomberg 1-3 Month T-Bill ETF contributes significantly with a 5.1% yield, while the Vanguard Total Bond Market Index Fund ETF offers a 3.6% yield. The Vanguard Total Stock Market Index Fund ETF and Vanguard Total International Stock Index Fund ETF provide additional income with yields of 1.3% and 3.0%, respectively. This dividend yield enhances the portfolio's appeal to income-focused investors, complementing the growth potential of its equity holdings.

Ongoing product costs Info

  • SPDR® Bloomberg 1-3 Month T-Bill ETF 0.14%
  • 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) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, reflecting cost-effective management. The Vanguard Total Bond Market Index Fund ETF and Vanguard Total Stock Market Index Fund ETF both have minimal costs of 0.03%, contributing to the overall efficiency. The slightly higher cost of the SPDR® Bloomberg 1-3 Month T-Bill ETF at 0.14% is offset by its income potential. This low-cost structure ensures that investors retain more of their returns, making it an attractive option for those who prioritize cost efficiency in their investment strategy.

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