A broadly diversified portfolio with a strong focus on US equities and technology sector

Report created on Jan 2, 2025

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 composed of three primary ETFs: Vanguard Total Stock Market Index Fund (70%), Vanguard Total International Stock Index Fund (20%), and Vanguard Information Technology Index Fund (10%). This allocation leans heavily towards US equities, with a significant portion in technology. While this structure offers broad market exposure, it may not fully capture opportunities in other asset classes like bonds or real estate. For a balanced profile, consider incorporating other asset classes to cushion against equity volatility. This could enhance stability, especially during market downturns.

Growth Info

Historically, the portfolio has shown impressive growth with a Compound Annual Growth Rate (CAGR) of 13.06%. However, it experienced a significant maximum drawdown of -34.26%, indicating vulnerability during market downturns. While past performance is not indicative of future results, it highlights the portfolio's potential for strong returns alongside substantial risk. To mitigate such risks, consider strategies like diversifying across more asset classes or adjusting allocations to more defensive sectors, which could provide a buffer during volatile periods.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, suggests potential portfolio growth. With 1,000 simulations, the median (50th percentile) return is projected at 460.17%, while the 5th percentile is 56.82%. These projections indicate a wide range of possible outcomes, emphasizing the inherent uncertainty in forecasting. While simulations offer insight, they are not guarantees. Regularly reviewing and adjusting the portfolio based on changing market conditions and personal goals can help manage expectations and align with desired outcomes.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with a minimal allocation to cash and other asset classes. This concentration in equities can drive significant growth but also introduces higher volatility. Compared to a balanced benchmark, which might include bonds or commodities, this portfolio could benefit from increased diversification. Adding fixed-income assets could reduce risk and provide more consistent returns, particularly in times of market stress. This adjustment aligns with a balanced risk profile, aiming for steady growth with manageable risk.

Sectors Info

  • Technology
    34%
  • Financials
    14%
  • Health Care
    10%
  • Consumer Discretionary
    9%
  • Industrials
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    3%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

The sector allocation is notably concentrated in technology (34.09%), followed by financial services and healthcare. This tech-heavy focus can lead to higher volatility, especially during periods of regulatory scrutiny or tech sector downturns. While the technology sector has been a strong performer, overexposure can increase risk. To enhance stability, consider diversifying into underrepresented sectors like utilities or consumer defensives. This approach can help balance sector risks and provide more consistent returns across different market cycles.

Regions Info

  • North America
    81%
  • 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 (81.18%), with limited exposure to other regions. This concentration can limit diversification benefits and expose the portfolio to US-specific risks. Compared to global benchmarks, there is notable under-exposure to emerging markets and Europe. Expanding geographic diversification could capture growth opportunities in developing regions and reduce reliance on the US market. This strategy can help balance risk and potentially enhance returns by tapping into different economic cycles.

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's risk-return profile could be optimized using the Efficient Frontier, which identifies the best possible risk-return combinations. Currently, the portfolio leans towards higher risk due to its equity concentration. By adjusting allocations, particularly by incorporating more diverse asset classes, the portfolio could achieve a more optimal balance. This doesn't necessarily mean reducing returns; rather, it aims to maximize returns for the given level of risk. Regular optimization reviews can ensure alignment with changing market conditions and personal risk tolerance.

Dividends Info

  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.65%

The portfolio's dividend yield stands at 1.65%, with the highest contribution from the Vanguard Total International Stock Index Fund at 3.4%. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. For investors seeking income, this yield offers moderate support. However, if income generation is a priority, consider increasing exposure to high-dividend sectors or funds. This adjustment can enhance cash flow while maintaining growth potential, aligning with income-focused investment goals.

Ongoing product costs Info

  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • 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 benefits from low costs, with a Total Expense Ratio (TER) of 0.05%. Low costs are advantageous as they improve net returns over time, allowing more of your investment to compound. Compared to higher-cost funds, this portfolio is well-positioned for cost efficiency. Maintaining a focus on low-cost ETFs or funds is a smart strategy, as it supports better long-term performance by minimizing expenses. Regularly reviewing fund fees can ensure that the portfolio remains cost-effective, maximizing returns.

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