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A balanced portfolio with strong US exposure and efficient cost structure

Report created on Dec 30, 2024

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 45% in the Vanguard Total Stock Market Index Fund and 30% in the Vanguard S&P 500 ETF. This composition leans towards growth, typical for balanced portfolios. The inclusion of international stocks at 10%, bonds at 5%, and real estate at 5% offers some diversification. Compared to standard balanced portfolios, this one is slightly more equity-heavy, which might increase volatility. Consider increasing bond allocation for more stability, especially if nearing retirement or seeking lower risk.

Growth Info

Historically, the portfolio has achieved a solid Compound Annual Growth Rate (CAGR) of 11.41%, indicating strong performance. The max drawdown of -32.52% reflects significant potential losses during downturns. This performance is impressive compared to many benchmarks but highlights exposure to market volatility. The concentrated equity exposure likely fueled the gains. Consider maintaining a long-term perspective to weather short-term fluctuations, as past performance doesn't guarantee future results.

Projection Info

Monte Carlo simulations, which use historical data to model future outcomes, suggest a median return of 140.42% over time. With 928 out of 1,000 simulations showing positive returns, the outlook appears promising. However, the 5th percentile projects a potential loss of -8.99%, emphasizing inherent uncertainties. While simulations provide insights, they aren't foolproof. Regularly review your portfolio to adjust to changing market conditions and personal goals.

Asset classes Info

  • Stocks
    85%
  • Bonds
    10%
  • Real Estate
    5%

The portfolio's asset allocation shows a heavy tilt towards stocks at approximately 84.68%, with bonds and real estate comprising 9.92% and 5%, respectively. This suggests a growth-oriented strategy, which can lead to higher returns but also increased volatility. Compared to typical balanced portfolios, this one is more aggressive. Consider rebalancing to include more bonds for stability, especially if your risk tolerance changes or market conditions shift.

Sectors Info

  • Technology
    25%
  • Financials
    12%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Real Estate
    7%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%

The sector allocation is dominated by technology at 25.07%, followed by financial services at 12% and healthcare at 9.45%. This tech-heavy approach may lead to higher volatility, especially during interest rate hikes. The portfolio's sector distribution aligns well with common benchmarks, indicating good diversification. However, consider monitoring sector performance and trends to ensure alignment with your risk tolerance and investment goals.

Regions Info

  • North America
    80%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

With 80.41% of the portfolio in North America, there's a significant geographic concentration. While this aligns with many US-focused investors, it limits exposure to potential growth in other regions. The limited allocation in Europe, Asia, and other regions may restrict diversification benefits. Consider gradually increasing international exposure to capture global opportunities and reduce reliance on the US market.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes highly correlated assets, such as the Vanguard Total Stock Market Index Fund and the Vanguard S&P 500 ETF. High correlation means these assets tend to move together, which can limit diversification benefits. Reducing overlap by choosing distinct assets can enhance diversification and improve risk management. Consider exploring other asset classes or funds that offer unique exposures to mitigate correlation.

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.

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The portfolio can be optimized using the Efficient Frontier, which identifies the best risk-return ratio. The current asset mix offers room for improvement by addressing high correlation and exploring alternative allocations. Optimization focuses on maximizing returns for a given risk level. Regularly reassess your portfolio's efficiency to stay aligned with your financial goals and risk tolerance.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Schwab U.S. TIPS ETF 2.30%
  • Vanguard Real Estate Index Fund ETF Shares 3.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.72%

The portfolio's overall dividend yield is 1.72%, with notable contributions from the Vanguard Total Bond Market Index Fund at 3.7% and the Vanguard Real Estate Index Fund at 3.8%. Dividends provide a steady income stream, which is beneficial for reinvestment or income generation. While the yield is modest, it complements the portfolio's growth focus. Continue to monitor dividend policies, as changes can impact overall returns.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Schwab U.S. TIPS ETF 0.03%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Vanguard S&P 500 ETF 0.03%
  • 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%

With a Total Expense Ratio (TER) of 0.04%, the portfolio is cost-effective, which supports better long-term performance. Low costs mean more returns stay in your pocket, enhancing compounding benefits. This aligns with best practices of minimizing fees to maximize growth. Ensure ongoing cost-efficiency by periodically reviewing fund fees and considering alternatives if costs rise or performance lags.

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