A balanced portfolio with strong diversification and a focus on US equities and dividends

Report created on Feb 3, 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 is primarily composed of three ETFs, with 50% allocated to a total stock market index, 30% to an international stock index, and 20% to a high dividend yield index. This structure provides a broad exposure to both domestic and international equities, aligning well with a balanced investment approach. The allocation reflects a preference for equity investments, with a minor cash component. Compared to a typical benchmark, this composition suggests a strong focus on the US market, complemented by international diversification.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 10.97%, which is commendable for a balanced risk profile. The maximum drawdown of -34.64% indicates the potential volatility during market downturns. Compared to benchmarks, the performance is competitive, reflecting the strength of the underlying ETFs. However, it's crucial to remember that past performance doesn't guarantee future results. The portfolio's historical resilience is a positive sign, but continuous monitoring is essential to maintain alignment with investment goals.

Projection Info

Forward projections using Monte Carlo simulations indicate a wide range of potential outcomes, with the 50th percentile suggesting a 268% increase over the investment period. This method uses historical data to simulate future performance, highlighting both the potential for growth and the inherent uncertainty in investing. While the median projection is promising, it's important to acknowledge that these simulations are based on historical trends, which may not predict future market conditions accurately. Nonetheless, the overall positive outlook suggests the portfolio is well-positioned for future growth.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards equities, with 99% in stocks and a negligible amount in cash. This allocation underscores a commitment to growth through equity investments. While this focus can drive returns, it also introduces volatility, particularly during market downturns. Compared to typical benchmarks, the lack of fixed income or alternative assets may limit risk mitigation. Diversifying across more asset classes could enhance stability, particularly for investors seeking to balance growth with risk management.

Sectors Info

  • Technology
    23%
  • Financials
    18%
  • Industrials
    11%
  • Consumer Discretionary
    10%
  • Health Care
    10%
  • Consumer Staples
    7%
  • Telecommunications
    7%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is well-distributed, with notable concentrations in technology (23%), financial services (18%), and industrials (11%). This distribution aligns closely with common benchmarks, suggesting a balanced approach to sector exposure. However, the tech-heavy allocation might introduce volatility, especially during periods of interest rate changes. Keeping an eye on sector trends and adjusting allocations as necessary can help manage risk and capitalize on emerging opportunities. The broad sector coverage is a strength, supporting diversification across different economic cycles.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America (72%), with additional exposure to Europe and Asia. This distribution reflects a strong home-country bias, typical for US-based investors. While the domestic focus has historically benefited from US market strength, increasing exposure to emerging markets could enhance diversification. Comparing to benchmarks, the portfolio's geographic allocation is relatively balanced, though slightly underweight in regions like Latin America and Africa. Expanding geographic exposure may help mitigate regional risks and tap into global growth opportunities.

Market capitalization Info

  • Mega-cap
    37%
  • Large-cap
    35%
  • Mid-cap
    20%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio's market capitalization distribution leans towards mega (37%) and big (35%) companies, with smaller allocations to medium, small, and micro caps. This skew towards larger companies provides stability and reduced volatility, as these companies are typically more established and resilient. However, smaller cap stocks can offer higher growth potential, albeit with increased risk. Compared to benchmarks, the portfolio's market cap allocation is well-aligned, though slightly conservative. Incorporating more small and micro-cap stocks could enhance growth prospects while maintaining diversification.

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 along the Efficient Frontier, balancing risk and return effectively. This optimization suggests that the current asset allocation achieves a favorable risk-return ratio, maximizing potential returns for the given level of risk. While the portfolio is already efficient, periodic reviews ensure it remains aligned with changing market conditions and investor goals. Adjustments may be necessary to maintain this balance, particularly as market dynamics evolve. The focus on efficiency is a strong indicator of prudent portfolio management.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.20%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 2.08%

With a total dividend yield of 2.08%, this portfolio provides a steady income stream, which can be appealing for income-focused investors. The inclusion of a high dividend yield ETF enhances this aspect, contributing to overall returns. Dividends can provide a buffer during market volatility, offering some stability. For investors prioritizing income, maintaining or increasing dividend-focused holdings may be beneficial. However, it's important to balance dividend yield with growth potential, ensuring the portfolio remains aligned with broader investment goals.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.05%

The total expense ratio (TER) of 0.05% is impressively low, reflecting the cost-effectiveness of the selected Vanguard ETFs. Low costs are crucial for enhancing long-term returns, as they minimize the drag on portfolio performance. Compared to industry averages, this TER is highly competitive, supporting better net returns over time. Keeping costs low is a key strength of this portfolio, allowing more of the investment growth to benefit the investor. Continuous monitoring of fees and exploring cost-effective options can further optimize portfolio performance.

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