A balanced portfolio with strong diversification and significant exposure to US equities

Report created on Mar 7, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of three major ETFs, with a significant emphasis on equities, making up 94% of the total allocation. The Vanguard Total Stock Market Index Fund ETF Shares holds the largest portion at 62.09%, followed by the Vanguard Total International Stock Index Fund ETF Shares at 32.58%, and a smaller allocation in bonds through the Vanguard Total Bond Market Index Fund ETF Shares at 5.33%. This composition is typical for a balanced portfolio, providing broad exposure across asset classes while maintaining a focus on growth through equities. The inclusion of bonds helps to moderate risk, aligning with the balanced risk profile.

Growth Info

Historically, this portfolio has delivered a robust compound annual growth rate (CAGR) of 10.55%, a strong indicator of past performance. However, it also experienced a maximum drawdown of -33.27%, which highlights the potential volatility during downturns. The portfolio's returns are concentrated, with 90% of gains occurring over just 27 days, emphasizing the importance of staying invested to capture these periods. Comparing this to a benchmark, the performance is commendable, but it's crucial to remember that past performance doesn't guarantee future results.

Projection Info

Using Monte Carlo simulations, which employ historical data to predict future outcomes, the portfolio shows a median growth of 150.9% over the projected period. The analysis, however, indicates a wide range of possible outcomes, with a 5th percentile at -2.2% and a 67th percentile at 223.1%. These projections underscore the inherent uncertainty in forecasting and the importance of preparing for various scenarios. With 942 out of 1,000 simulations showing positive returns, the outlook appears optimistic, yet it's essential to remain aware of the limitations of such models.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%
  • Cash
    1%

The portfolio's asset allocation is heavily weighted towards stocks at 94%, with bonds comprising 5% and cash at 1%. This allocation provides significant growth potential but may expose the portfolio to higher volatility during market downturns. Compared to typical balanced portfolios, the bond allocation is relatively low, suggesting a tilt towards growth rather than income stability. Investors might consider adjusting the bond allocation to better align with their risk tolerance and income needs, particularly if seeking more stability in volatile markets.

Sectors Info

  • Technology
    24%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation reveals a diverse spread, with technology leading at 24%, followed by financial services at 15% and consumer cyclicals at 11%. While the tech-heavy allocation could drive growth, it may also increase volatility, especially during interest rate hikes. The presence of 11 sectors, each with less than 2% allocation not counted, indicates a well-rounded approach that aligns closely with broad market benchmarks. This diversity helps mitigate sector-specific risks and supports overall portfolio stability, yet it's crucial to monitor sector trends that could impact performance.

Regions Info

  • North America
    64%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, accounting for 64% of the allocation. This concentration reflects a common preference for domestic investments, particularly for US-based investors. However, the exposure to Europe, Asia, and other regions adds a layer of international diversification, albeit with some under-exposure to emerging markets. Balancing geographic exposure could enhance diversification and potentially reduce risks associated with regional economic downturns. Investors might consider increasing exposure to underrepresented regions to further diversify.

Market capitalization Info

  • Mega-cap
    40%
  • Large-cap
    29%
  • Mid-cap
    18%
  • Small-cap
    5%
  • Micro-cap
    1%

The portfolio's market capitalization is skewed towards larger companies, with 40% in mega-cap stocks and 29% in big-cap stocks. This allocation typically offers stability and lower volatility compared to smaller companies, which are more sensitive to market fluctuations. Medium, small, and micro-cap stocks make up a smaller portion, providing some growth potential but also higher risk. The distribution aligns with common benchmarks, suggesting a balanced approach. Investors may wish to adjust the allocation to smaller caps if seeking higher growth potential, albeit 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, a concept that identifies the best possible risk-return ratio for a given set of assets. This optimization focuses on adjusting the current asset allocation to improve the balance between risk and return. While the portfolio is already well-diversified, exploring minor adjustments in asset weightings could enhance its efficiency. It's important to note that optimization is based solely on existing assets, and the goal is to achieve the best risk-return trade-off, not necessarily diversification.

Dividends Info

  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.10%
  • Weighted yield (per year) 2.01%

The portfolio's overall dividend yield is 2.01%, with the Vanguard Total Bond Market Index Fund ETF Shares contributing a substantial 3.70%. This yield provides a modest income stream, which can be particularly appealing for investors seeking regular cash flow. While the equity funds offer lower yields, they contribute to growth potential. For income-focused investors, increasing the allocation to higher-yielding assets could enhance cash flow. However, it's essential to balance yield with growth potential and risk tolerance to maintain the portfolio's overall objectives.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund ETF Shares 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) 0.05%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of just 0.05%. This low-cost structure supports better long-term performance by minimizing the drag on returns. Compared to industry averages, these costs are highly competitive, allowing more of the portfolio's gains to compound over time. Keeping costs low is crucial for maximizing investment returns, and this portfolio excels in this area. Investors should continue to monitor expenses, ensuring they remain aligned with their investment strategy and objectives.

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