Balanced and Broadly Diversified Portfolio with Strong Historical Returns and Low Costs

Report created on Dec 3, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is mostly made up of ETFs, with a significant portion in the Vanguard Total Stock Market Index Fund ETF Shares, making up 70% of the portfolio. This reflects a strong focus on broad market exposure, which is generally a solid choice for balanced growth. Additionally, the Vanguard Total International Stock Index Fund ETF Shares and Invesco NASDAQ 100 ETF provide international and tech-heavy exposure, respectively. This composition offers a good mix of domestic and international equities, catering to a balanced investment approach.

Growth Info

The historical performance of this portfolio is quite impressive, with a compound annual growth rate (CAGR) of 13.49%. This indicates that a hypothetical initial investment has grown substantially over time. However, the maximum drawdown of -26.39% suggests that there have been significant fluctuations, which is typical for equity-heavy portfolios. The fact that just 19 days account for 90% of returns highlights the importance of staying invested to capture these gains. Investors should be prepared for volatility but can expect strong long-term growth.

Projection Info

Using a Monte Carlo simulation, which involves running numerous scenarios to project future returns, the portfolio shows promising potential. Assuming a hypothetical initial investment, the median projection suggests a 425.92% increase, with a 67th percentile projection of 633.24%. This indicates a high likelihood of positive returns, as 988 out of 1,000 simulations were profitable. The annualized return across all simulations is 14.03%, suggesting robust future performance, although investors should remain aware of the inherent uncertainties in projections.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted towards stocks, comprising 99.47% of the asset allocation. This is typical for a balanced portfolio aiming for growth, but it also means higher exposure to market volatility. While stocks generally offer higher returns over the long term, they can also experience significant short-term fluctuations. To potentially reduce risk, consider diversifying into other asset classes like bonds or real estate, which can provide stability and income in turbulent market conditions.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    3%

The sector allocation is diverse, with a notable emphasis on technology (27.34%), financial services (14.57%), and consumer cyclicals (10.68%). This distribution aligns well with current market trends, offering exposure to sectors with growth potential. However, the concentration in technology could lead to higher volatility. To mitigate sector-specific risks, consider maintaining a balanced allocation across various sectors. This approach can help cushion the portfolio against downturns in any single sector while still capturing growth opportunities.

Regions Info

  • North America
    76%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with 76.49% of the allocation. This reflects a strong home bias, which is common among U.S. investors. While this can be beneficial given the robust U.S. market performance, it's also important to have exposure to other regions to diversify geopolitical risks. The portfolio does include allocations to Europe, Asia, and other regions, which is a positive step towards global diversification. Consider maintaining this global exposure to balance regional risks.

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-diversified and balanced, suggesting that optimization efforts could focus on fine-tuning risk and return preferences. By adjusting along the efficient frontier, investors can achieve a riskier portfolio by increasing equity exposure or a more conservative one by adding bonds. Given the current composition, further optimization may not be necessary unless there's a change in investment goals or risk tolerance. For now, maintaining the existing diversification and low-cost structure is a solid strategy.

Dividends Info

  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.62%

The portfolio has a total dividend yield of 1.62%, which provides a modest income stream. The Vanguard Total International Stock Index Fund ETF Shares contribute the highest yield at 3.0%, enhancing the portfolio's income potential. While dividend income is not the primary focus of this growth-oriented portfolio, it can still offer a degree of stability and cash flow. To increase income, consider gradually increasing the allocation to higher-yielding investments, while keeping the overall growth strategy intact.

Ongoing product costs Info

  • Invesco NASDAQ 100 ETF 0.15%
  • 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) 0.05%

The portfolio is cost-efficient, with a total expense ratio (TER) of 0.05%. This low cost is largely due to the inclusion of Vanguard ETFs, which are known for their affordability. Keeping investment costs low is crucial for maximizing net returns over time. High fees can significantly eat into profits, especially over the long term. Maintaining this focus on low-cost funds is advisable, as it allows more of the portfolio's returns to benefit the investor, enhancing overall performance.

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