Balanced portfolio with a strong foundation in US equities and diversified bond exposure
Report created on May 28, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 64.00% -
BN Vanguard Total Bond Market Index Fund ETF Shares
BND - US9219378356 20.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 16.00%
The portfolio is predominantly composed of US equities (64%), with substantial allocations to both US and international bonds (20%) and international equities (16%). This structure reflects a balanced approach, leveraging the growth potential of stocks while using bonds to mitigate volatility. The heavy weighting towards the Vanguard S&P 500 ETF suggests a strong belief in the US market's long-term growth potential. However, this concentration also introduces significant exposure to US market performance.
Growth
Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 10.30%, with a maximum drawdown of -28.97%. These figures indicate a resilient performance through varying market conditions, with the drawdown highlighting potential volatility during market downturns. The days contributing to 90% of returns being limited to 28 suggest that the portfolio's gains are concentrated in specific periods, underscoring the importance of staying invested through market cycles to capture significant growth spurts.
Projection
Monte Carlo simulations, which project future performance based on historical data, suggest a wide range of outcomes for this portfolio. With 944 out of 1,000 simulations showing positive returns, the median projection indicates a potential 145.6% growth. However, it's crucial to remember that such simulations cannot predict future market conditions with certainty and should be used as one of many tools in evaluating investment strategies.
Asset classes
- Stocks 79%
- Bonds 20%
- Cash 1%
The asset allocation leans heavily towards stocks (79%), with bonds making up 20% and a negligible cash position. This distribution aligns with a balanced but growth-oriented investor, aiming for higher returns through equities while using bonds to provide stability and income. The portfolio's asset class distribution is well-considered, balancing the pursuit of growth with the need for risk management through diversification.
Sectors
- Technology 22%
- Financials 13%
- Consumer Discretionary 8%
- Health Care 8%
- Industrials 7%
- Telecommunications 7%
- Consumer Staples 5%
- Energy 3%
- Basic Materials 2%
- Utilities 2%
- Real Estate 2%
The sectoral allocation is diversified across technology, financial services, consumer cyclicals, healthcare, and industrials, among others. This diversification helps mitigate sector-specific risks and capitalizes on growth across different areas of the economy. The technology sector's prominent position reflects its significant role in current and future economic growth, though it may also introduce higher volatility.
Regions
- North America 65%
- Europe Developed 7%
- Asia Emerging 3%
- Japan 2%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographic allocation is predominantly in North America (65%), with smaller exposures to developed Europe, emerging Asia, and other regions. This distribution emphasizes the portfolio's confidence in the US and North American markets while still capturing growth opportunities in international markets. However, the relatively low exposure to emerging markets may limit potential high-growth opportunities.
Market capitalization
- Mega-cap 37%
- Large-cap 27%
- Mid-cap 14%
- Small-cap 1%
The portfolio's exposure across market capitalizations is concentrated in mega (37%) and big (27%) cap stocks, with lesser allocations to medium and small caps. This skew towards larger companies is typical for a portfolio aiming for stability and lower volatility, as these companies are generally more resilient in downturns. However, this could also limit potential upside from faster-growing smaller 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 current asset allocation nears an efficient frontier, indicating an optimized risk-return profile based on historical data. However, it's important to review this periodically, as changes in market conditions can shift the efficient frontier. Adjusting the allocation could further optimize returns for the given level of risk, though the portfolio already demonstrates a well-considered balance between risk and potential returns.
Dividends
- Vanguard Total Bond Market Index Fund ETF Shares 3.80%
- Vanguard S&P 500 ETF 1.30%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Weighted yield (per year) 2.06%
The portfolio's dividend yield stands at 2.06%, with the bond component contributing a significant portion of this income through its 3.80% yield. Dividends provide a steady income stream and can contribute to the portfolio's total return, particularly in volatile or down markets. The balanced approach to dividend-yielding assets is commendable, providing both growth potential and income.
Ongoing product costs
- 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 0.05%
- Weighted costs total (per year) 0.03%
The portfolio benefits from low costs, with Total Expense Ratios (TER) for the included ETFs ranging from 0.03% to 0.05%. Low costs are crucial for enhancing long-term returns, as they compound over time. This portfolio's focus on cost efficiency is a strong point, ensuring that more of the investment returns are retained by the investor.
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