Balanced and Highly Diversified Portfolio with Strong Historic Performance and Efficient Frontier Alignment

Report created on Nov 12, 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 Vanguard ETFs, with a majority allocation in the Vanguard S&P 500 ETF at 60%. The remaining 40% is split equally between the Vanguard Short-Term Bond Index Fund ETF Shares and the Vanguard Total International Stock Index Fund ETF Shares. This composition indicates a balanced approach, with a focus on U.S. equities and a moderate allocation to international stocks and bonds. This setup provides a solid foundation for diversification, spreading risk across various asset classes and geographies, which is essential for minimizing potential losses and optimizing returns.

Growth Info

Historically, the portfolio has shown a commendable performance with a Compound Annual Growth Rate (CAGR) of 9.93%. Despite a maximum drawdown of -29.11%, the portfolio has demonstrated resilience, recovering swiftly to achieve substantial gains. The fact that 90% of the returns were achieved in just 30 days highlights the importance of staying invested for the long term to capture these critical periods. This performance underscores the portfolio's ability to deliver consistent growth, making it a suitable choice for investors seeking steady returns over time.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected, assuming a hypothetical initial investment. The simulation suggests a broad range of potential outcomes, with the 5th percentile at 4.48% and the 67th percentile at 216.86%. The median outcome stands at 152.36%, with an annualized return of 7.66%. This indicates a strong likelihood of positive returns, with 957 of the simulations yielding gains. Monte Carlo simulations provide a probabilistic view of potential future outcomes, helping investors understand the range of possibilities and plan accordingly.

Asset classes Info

  • Stocks
    80%
  • Bonds
    20%
  • Cash
    1%

The portfolio is diversified across two primary asset classes: stocks and bonds. Stocks make up approximately 79.65% of the portfolio, while bonds account for 19.77%. This allocation aligns with a balanced investment strategy, offering growth potential from equities and stability from fixed-income securities. The presence of cash and other minor asset classes is negligible, ensuring that the focus remains on the core investments. This mix is ideal for investors seeking a blend of growth and risk mitigation, as it allows for capital appreciation while providing a buffer during market downturns.

Sectors Info

  • Technology
    22%
  • Financials
    12%
  • Health Care
    9%
  • Consumer Discretionary
    8%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector-wise, the portfolio is well-diversified, with significant exposure to technology (22.41%), financial services (11.87%), and healthcare (8.55%). Other sectors like consumer cyclicals, industrials, and communication services also contribute to the diversity, each holding a substantial portion. This spread across various industries reduces sector-specific risks and capitalizes on different economic cycles. Such diversification is crucial for maintaining a balanced risk profile, as it prevents over-reliance on any single sector, thus enhancing the portfolio's resilience against market volatility and sector downturns.

Regions Info

  • North America
    61%
  • 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, which constitutes 61.20% of the holdings. There is also notable exposure to developed markets in Europe and Asia, as well as emerging markets. This geographical spread ensures that the portfolio benefits from global economic growth while mitigating risks associated with any single region. Such diversification allows for capturing opportunities in different markets, providing a cushion against regional economic downturns. It also enables the portfolio to leverage growth in emerging markets, which can offer higher returns due to their dynamic economic environments.

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 well-aligned with the efficient frontier, indicating that it is currently optimized for the given risk-return profile. While it is not the absolute optimal portfolio, which has a higher expected return and risk level, it effectively balances risk and reward. Investors could consider adjusting their risk level to match their preferences more closely, but overall, the current setup provides a robust framework for achieving financial goals. The efficient frontier concept illustrates the trade-off between risk and return, guiding investors towards the most efficient portfolio for their risk tolerance.

Dividends Info

  • Vanguard Short-Term Bond Index Fund ETF Shares 3.30%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.98%

The portfolio's dividend yield stands at 1.98%, with contributions from all three ETFs. The Vanguard Short-Term Bond Index Fund ETF Shares offers the highest yield at 3.3%, followed by the Vanguard Total International Stock Index Fund ETF Shares at 3.0%, and the Vanguard S&P 500 ETF at 1.2%. This dividend income provides a steady cash flow, which can be reinvested to enhance overall returns or used to meet short-term financial needs. A focus on dividend-paying investments is beneficial for investors seeking regular income alongside capital appreciation.

Ongoing product costs Info

  • Vanguard Short-Term Bond Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio is cost-efficient, with a Total Expense Ratio (TER) of 0.04%. This low-cost structure is primarily due to the use of Vanguard ETFs, known for their competitive expense ratios. Lower costs directly contribute to higher net returns, as they minimize the drag on performance. By maintaining a focus on cost-effective investment vehicles, the portfolio ensures that more of the returns are retained by the investor. This approach is crucial for long-term wealth accumulation, as it allows compounding to work more effectively over time.

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