A balanced portfolio with low costs and a strong focus on US equities

Report created on Jan 16, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 90% in the Vanguard Total Stock Market Index Fund ETF and 10% in the Vanguard Total International Stock Index Fund ETF. This composition leans significantly towards U.S. stocks, which may limit diversification benefits. While this setup can capitalize on U.S. market growth, it might expose the portfolio to domestic market fluctuations. Consider introducing other asset classes like bonds or real estate to enhance diversification and reduce potential volatility, aligning with common balanced portfolio benchmarks.

Growth Info

Historically, the portfolio has demonstrated robust growth, with a Compound Annual Growth Rate (CAGR) of 13.02%. This performance is impressive, especially when compared to typical benchmarks. However, the portfolio also experienced a significant maximum drawdown of -34.92%, indicating vulnerability during market downturns. While past performance doesn't guarantee future results, understanding these trends can help set realistic expectations. To mitigate potential losses, consider strategies such as increasing cash reserves or diversifying across more asset classes.

Projection Info

Forward projections using Monte Carlo simulations suggest an annualized return of 10.32%, with the majority of simulations yielding positive outcomes. Monte Carlo simulations use historical data to estimate a range of future outcomes, providing a probabilistic view of potential returns. However, it's important to note that these projections are not certainties. To enhance potential outcomes, consider adjusting asset allocations based on evolving market conditions and personal risk tolerance, ensuring alignment with long-term investment goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's asset allocation is heavily skewed towards stocks, comprising over 99% of the total assets. While this can drive growth, it may also increase risk due to lack of diversification. Compared to typical balanced portfolios, which often include bonds and other asset classes, this allocation is quite concentrated. To achieve better diversification, consider incorporating fixed-income securities or alternative investments, which can provide stability and reduce volatility, especially in uncertain market environments.

Sectors Info

  • Technology
    30%
  • Financials
    14%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Real Estate
    3%
  • Utilities
    2%
  • Basic Materials
    2%

The sector allocation is primarily concentrated in Technology (30%) and Financial Services (14%), with other sectors like Consumer Cyclicals and Healthcare also having significant weightings. This concentration in tech could lead to higher volatility, particularly during periods of regulatory scrutiny or interest rate changes. While having exposure to growth sectors is beneficial, balancing it with more defensive sectors could stabilize returns. Regularly reviewing and rebalancing sector weights can help align the portfolio with broader market trends and personal risk preferences.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is overwhelmingly focused on North America, with 90% exposure, and limited allocations to other regions. This concentration may miss out on the growth potential in emerging markets and other international economies. Diversifying geographically can reduce risk associated with regional economic downturns and currency fluctuations. Expanding exposure to underrepresented areas like Asia and Europe could improve diversification and capture global growth opportunities, aligning more closely with global benchmarks.

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 could potentially be optimized using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio. This involves adjusting the current asset allocations to find an optimal balance between risk and return. While the portfolio is already low-cost and growth-focused, exploring minor allocation adjustments among stocks and considering the inclusion of bonds or other asset classes could enhance efficiency. This approach helps in achieving desired returns while managing risk effectively.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.51%

The portfolio's dividend yield stands at 1.51%, with the international ETF contributing a higher yield of 3.4%. Dividends can provide a steady income stream, which is particularly appealing for investors seeking regular cash flow. However, the overall yield is relatively modest, given the portfolio's growth focus. To increase income potential, consider adding higher-yielding assets or dividend-focused funds. This can enhance cash flow without significantly altering the portfolio's risk profile.

Ongoing product costs Info

  • 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 boasts impressively low costs, with a total expense ratio (TER) of just 0.04%. Low costs are crucial for long-term investment success, as they enhance net returns by minimizing fees. This cost structure aligns well with best practices, allowing more capital to remain invested and compound over time. Maintaining this low-cost approach is advisable, but periodically reviewing fund fees and exploring even lower-cost options, if available, can further optimize returns.

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