Balanced Portfolio with High Diversification and Low Costs Offering Moderate Risk and Consistent Growth Potential

Report created on Nov 24, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of three main ETFs: Vanguard Total Stock Market Index Fund ETF Shares (70%), Vanguard Total International Stock Index Fund ETF Shares (20%), and Vanguard Total Bond Market Index Fund ETF Shares (10%). This allocation reflects a balanced approach, focusing heavily on stocks with a moderate allocation to bonds. The high diversification across these ETFs provides a broad market exposure, reducing individual stock risk. This composition is ideal for those seeking a blend of growth and stability, leveraging the strengths of both domestic and international markets.

Growth Info

Historically, the portfolio has delivered a robust CAGR of 10.94%, demonstrating strong growth over time. The maximum drawdown of -32.27% indicates periods of significant market volatility, yet the portfolio has managed to recover and sustain its upward trajectory. With 29 days accounting for 90% of returns, it highlights the importance of staying invested during volatile times to capture gains. This historical performance suggests a resilient portfolio capable of weathering market fluctuations while maintaining a long-term growth focus.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation estimated a 50th percentile end value growth of 144.02%, with a 67th percentile reaching 205.78%. An annualized return of 7.48% was observed across all simulations, indicating potential for solid growth. This method, which uses random sampling to predict future outcomes, suggests the portfolio is well-positioned for long-term gains, though it also highlights the potential for downside risk, as seen in the 5th percentile projection of -6.29%.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%
  • Cash
    1%

The portfolio predominantly consists of stocks, accounting for 89.55%, with bonds making up 9.89%. This allocation reflects a growth-oriented strategy, leveraging the potential of equities while maintaining a safety net through bonds. The small allocation in cash and other assets suggests a focus on maximizing returns rather than holding liquid assets. A balanced mix like this can provide stability, especially in volatile markets, while still capturing the growth potential of equities. Adjustments can be made to increase bond exposure for a more conservative approach.

Sectors Info

  • Technology
    24%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

The sector allocation is diverse, with technology leading at 24.14%, followed by financial services at 13.51% and healthcare at 9.91%. This diversification across sectors minimizes exposure to sector-specific risks. Such a spread allows the portfolio to benefit from growth in various industries while cushioning against downturns in any single sector. Given this broad exposure, the portfolio is well-equipped to navigate the cyclical nature of different industries. However, periodic reviews are suggested to ensure alignment with market trends and personal investment goals.

Regions Info

  • North America
    71%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The geographic allocation is heavily skewed towards North America at 71.22%, with Europe Developed and Asia Emerging making up smaller portions. This concentration in North America indicates a reliance on the stability and growth of the U.S. market. While this provides a solid foundation, the portfolio also taps into international markets, offering exposure to diverse economic environments. This geographic mix provides a good balance between domestic stability and international growth potential. Consider increasing exposure to underrepresented regions for further 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 is already well-optimized with its balanced asset allocation and high diversification. Moving along the efficient frontier can help adjust the risk profile. For risk-averse investors, increasing the bond allocation could provide more stability. Conversely, those seeking higher returns might consider a greater emphasis on equities. However, given the current composition, further optimization may yield marginal benefits. Instead, focus on maintaining the current diversification and low costs, which are crucial for long-term success. Regular reviews ensure alignment with evolving financial goals and risk tolerance.

Dividends Info

  • 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) 1.87%

The portfolio's dividend yield stands at 1.87%, with contributions from all three ETFs. The Vanguard Total Bond Market Index Fund ETF Shares offers the highest yield at 3.6%, providing a steady income stream. This yield is beneficial for investors seeking regular income alongside capital appreciation. While the yield is modest, reinvesting dividends can compound returns over time. For those prioritizing income, exploring higher-yielding assets or increasing bond allocation could be considered, though this may affect overall growth potential.

Ongoing product costs Info

  • 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) 0.04%

The portfolio's costs are impressively low, with a total expense ratio (TER) of 0.04%. This is a significant advantage, as low costs contribute to higher net returns over time. The minimal fees associated with these Vanguard ETFs ensure that more of the portfolio's performance is retained by the investor. Keeping costs low is a fundamental principle of successful investing, and this portfolio excels in this area. Continually monitoring and managing costs will ensure that the portfolio remains efficient and effective in achieving long-term goals.

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