A balanced and diversified portfolio with strong global exposure and low costs
Report created on Mar 7, 2025Risk profile
4/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 50.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 50.00%
This portfolio is composed of two ETFs, equally distributed between the Vanguard Total Stock Market Index Fund ETF and the Vanguard Total International Stock Index Fund ETF. This structure provides broad exposure to both U.S. and international markets. Having a 50/50 split between domestic and international equities aligns well with global market capitalization weights, offering a balanced approach to diversification. This allocation is well-suited for investors seeking broad market exposure without the complexity of managing multiple asset classes. To enhance diversification further, consider including other asset classes like bonds or real estate.
Growth
Historically, this portfolio has delivered a solid Compound Annual Growth Rate (CAGR) of 10.10%. This performance reflects strong equity market returns over recent years, particularly in the U.S. market. The portfolio's max drawdown of -34.45% highlights the potential for significant value fluctuations during market downturns. While past performance is no guarantee of future results, these figures suggest a resilient portfolio with a history of recovering from market setbacks. To mitigate future drawdowns, consider introducing assets with lower correlations to equities.
Projection
The Monte Carlo simulation, which uses historical data to model potential future outcomes, shows promising results. With 1,000 simulations, the median expected return is 243.3%, indicating a strong potential for growth. However, it's important to note that simulations are based on past data and cannot predict future results with certainty. The 5th percentile outcome of 12.1% highlights potential downside risks. To prepare for various market conditions, regularly review and adjust the portfolio as needed, ensuring it aligns with your risk tolerance and financial goals.
Asset classes
- Stocks 98%
- Cash 2%
This portfolio is heavily weighted towards stocks, with 98% of assets in equities and a small 2% in cash. Such a high equity allocation can drive growth but also increases exposure to market volatility. Compared to benchmarks, this allocation is aggressive and may not provide the same level of risk mitigation as a more diversified mix. To enhance risk management, consider incorporating other asset classes like bonds, which can offer stability and income during volatile periods.
Sectors
- Technology 23%
- Financials 18%
- Industrials 12%
- Consumer Discretionary 11%
- Health Care 10%
- Telecommunications 7%
- Consumer Staples 6%
- Basic Materials 4%
- Energy 4%
- Real Estate 3%
- Utilities 3%
The sector allocation is diverse, with technology leading at 23%, followed by financial services at 18%. This broad sector exposure aligns well with global benchmarks, offering a balanced approach to sector risk. However, the tech-heavy tilt may result in higher volatility, especially during periods of interest rate hikes. To mitigate sector-specific risks, consider periodically rebalancing to maintain a diversified sector allocation. This ensures that no single sector disproportionately impacts overall portfolio performance.
Regions
- North America 54%
- Europe Developed 19%
- Asia Emerging 8%
- Japan 8%
- Asia Developed 5%
- Australasia 2%
- Africa/Middle East 2%
- Latin America 1%
The portfolio's geographic spread is well-diversified, with 54% in North America and significant allocations in Europe and Asia. This global exposure reduces reliance on any single region and aligns closely with global market benchmarks. However, emerging markets are underrepresented, which may limit growth opportunities. To capture potential growth in these regions, consider increasing exposure to emerging markets. This can enhance diversification and provide access to faster-growing economies, though it may also introduce higher volatility.
Market capitalization
- Mega-cap 42%
- Large-cap 31%
- Mid-cap 18%
- Small-cap 5%
- Micro-cap 1%
The portfolio's market capitalization distribution is well-aligned with global standards, with a focus on mega and big-cap stocks. This allocation provides stability and liquidity, as larger companies tend to be more established and financially resilient. However, the relatively low exposure to small and micro-cap stocks may limit potential for outsized growth. To capture growth opportunities, consider increasing exposure to smaller companies, which can offer higher returns but also come with increased risk.
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 be optimized using the Efficient Frontier, which focuses on achieving the best possible risk-return ratio with the current assets. This approach ensures that the portfolio is positioned to maximize returns for a given level of risk. While the current allocation is already well-balanced, slight adjustments in asset weightings could further enhance efficiency. Regularly reviewing the portfolio's position on the Efficient Frontier ensures alignment with your risk tolerance and financial goals.
Dividends
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Vanguard Total International Stock Index Fund ETF Shares 3.10%
- Weighted yield (per year) 2.20%
With a total dividend yield of 2.20%, this portfolio provides a moderate income stream. Dividends can be a valuable source of returns, particularly in low-growth environments. The yield is supported by the Vanguard Total International Stock Index Fund, which offers a higher yield of 3.10%. For investors seeking income, consider reinvesting dividends to compound returns or using them to rebalance the portfolio. This approach can enhance long-term growth while maintaining exposure to dividend-paying stocks.
Ongoing product costs
- 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) 0.06%
The portfolio's total expense ratio (TER) is impressively low at 0.06%, thanks to the cost-efficient nature of the Vanguard ETFs. Low costs are crucial for maximizing long-term returns, as they reduce the drag on performance. This cost efficiency is a significant advantage, aligning with best practices for cost-conscious investing. To maintain this advantage, regularly review and compare ETF fees to ensure continued cost-effectiveness. This vigilance helps preserve more of your investment returns over time.
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