A balanced and highly diversified portfolio with a strong focus on US equities

Report created on Dec 21, 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 primarily composed of three Vanguard index funds, with a heavy emphasis on US equities (70%), complemented by international stocks (20%) and bonds (10%). This composition reflects a balanced approach, aiming for growth with a moderate level of risk. Compared to a typical balanced benchmark, this portfolio leans more towards equities, which could offer higher returns but also increased volatility. Maintaining a diversified mix of asset classes is crucial for managing risk and capturing growth opportunities. To further optimize, consider adjusting proportions to align with evolving market conditions and personal risk tolerance.

Growth Info

Historically, the portfolio has achieved a robust Compound Annual Growth Rate (CAGR) of 10.75%, indicating strong performance over time. However, it experienced a maximum drawdown of -32.22%, highlighting potential vulnerability during market downturns. Comparing this to a standard balanced benchmark, the portfolio's performance is commendable, yet the drawdown suggests a need for risk management strategies. While past performance is not a guarantee of future results, understanding these trends can guide future investment decisions. Regularly reviewing performance metrics can help ensure the portfolio continues to align with financial goals.

Projection Info

Forward projections using Monte Carlo simulations, which analyze potential outcomes based on historical data, show a median return of 130.37% and a 67th percentile return of 200.18%. These simulations, while informative, have limitations as they rely on past data and assumptions. The annualized return of 7.2% across simulations suggests a positive outlook, yet it's important to remain cautious of market unpredictability. Using these insights, consider stress-testing the portfolio against various economic scenarios to better prepare for future uncertainties.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio is predominantly allocated to stocks (89.45%) with a smaller allocation to bonds (9.89%) and minimal cash holdings. This heavy stock allocation is typical for investors seeking growth, but it may expose the portfolio to higher volatility. Compared to a balanced benchmark, the bond allocation is relatively low, which could impact stability during market downturns. To enhance diversification, consider increasing exposure to bonds or other asset classes that can provide a buffer against equity market fluctuations.

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 shows a significant concentration in technology (24.17%), followed by financial services and healthcare. This tech-heavy focus aligns with current market trends but may increase volatility, especially during interest rate fluctuations. Compared to a standard benchmark, the sector distribution is well-diversified, yet the high tech exposure warrants monitoring. To mitigate sector-specific risks, consider rebalancing to ensure a more even distribution across sectors, potentially adding exposure to underrepresented areas like utilities or consumer defensive sectors.

Regions Info

  • North America
    71%
  • No data
    10%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America (71.27%), with limited exposure to other regions. This concentration may limit diversification benefits and increase vulnerability to regional economic shifts. Compared to global benchmarks, the portfolio's geographic allocation is skewed towards the US, potentially missing growth opportunities in emerging markets. To enhance geographic diversification, consider increasing exposure to regions like Asia or Europe, which may offer different growth dynamics and risk profiles.

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 can potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio for the given assets. This optimization focuses on adjusting current allocations to achieve maximum efficiency, rather than diversification. While the current portfolio is well-diversified, exploring optimization opportunities can further enhance performance. Regularly reassessing asset allocations and incorporating optimization strategies may improve the portfolio's risk-return profile, aligning with financial objectives.

Dividends Info

  • Vanguard Total Bond Market Index Fund Admiral Shares 3.30%
  • VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 1.60%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.90%
  • Weighted yield (per year) 1.28%

The portfolio's overall dividend yield is 1.28%, primarily driven by the bond fund's 3.3% yield. While dividend income is not a primary focus, it provides some stability and income potential. Compared to typical balanced portfolios, the yield is modest, reflecting the growth-oriented approach. For investors seeking higher income, consider exploring dividend-focused funds or increasing bond allocation. Balancing growth and income needs is essential to achieving long-term financial goals.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund Admiral Shares 0.05%
  • VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 0.12%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) of 0.06% is impressively low, reflecting Vanguard's cost-effective fund offerings. Low costs are a significant advantage, enhancing net returns over time. Compared to industry averages, this cost structure is highly competitive and supports long-term performance. Maintaining a focus on cost-efficient investments is crucial, as high fees can erode returns. Regularly reviewing fund expenses ensures the portfolio remains aligned with cost-effective investment principles.

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