Balanced portfolio with a focus on US equities and moderate international exposure
Report created on Dec 12, 2024Risk profile
4/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 80.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00%
This portfolio is heavily weighted towards equities, with 80% allocated to the Vanguard Total Stock Market Index Fund ETF and 20% to the Vanguard Total International Stock Index Fund ETF. The allocation reflects a strong bias towards U.S. equities, complemented by international exposure. This composition aims to capture broad market growth while maintaining some diversification through international investments. While the portfolio is broadly diversified in terms of sectors, it is less so geographically. Consideration could be given to further balancing the geographic exposure to reduce reliance on the U.S. market.
Growth
Historically, the portfolio has shown a compound annual growth rate (CAGR) of 12.73%, indicating strong past performance. However, it also experienced a maximum drawdown of -34.74%, highlighting potential volatility. The concentration of returns in just 31 days underscores the importance of staying invested to capture these gains. While past performance is not indicative of future results, it provides a sense of the portfolio's behavior in various market conditions. Investors should prepare for periods of volatility and ensure they have the risk tolerance to withstand such fluctuations.
Projection
Monte Carlo simulations, which use historical data to project future outcomes, suggest a range of potential returns. With 1,000 simulations, the portfolio's annualized return is projected at 11.48%. The 5th percentile projects a 26.67% return, while the 50th and 67th percentiles suggest 282.09% and 415.25% returns, respectively. These scenarios highlight the uncertainty and potential variability in future performance. While simulations provide useful insights, they are based on historical data and assumptions that may not hold in the future. Investors should use these projections as one of many tools in decision-making.
Asset classes
- Stocks 100%
The portfolio is predominantly comprised of stocks, with minimal allocations to cash and other asset classes. This heavy equity focus can lead to higher returns but also comes with increased risk. Diversification across multiple asset classes, such as bonds or real estate, could potentially reduce volatility and enhance risk-adjusted returns. By incorporating a broader range of asset classes, investors can better manage risk and improve the portfolio's resilience to market fluctuations.
Sectors
- Technology 27%
- Financials 15%
- Health Care 11%
- Consumer Discretionary 10%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Real Estate 3%
- Utilities 3%
Sector allocation is well-distributed, with technology leading at 27.22%, followed by financial services and healthcare. While this offers exposure to various economic segments, the technology sector's significant weighting may introduce concentration risk. A balanced sector allocation can mitigate the impact of downturns in specific industries. Investors might consider adjusting sector weights to align with their risk tolerance and market outlook, ensuring robust diversification across economic cycles.
Regions
- North America 81%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
The portfolio has a strong geographic bias towards North America, accounting for over 81% of the allocation. While this reflects the global dominance of U.S. markets, it also exposes the portfolio to regional economic risks. Diversifying across more regions could provide a hedge against potential downturns in the U.S. economy. By increasing exposure to emerging markets or other developed regions, investors can enhance diversification and potentially capture growth opportunities globally.
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 aims to achieve the best possible risk-return ratio. This involves adjusting the current asset allocation to find a balance that maximizes returns for a given level of risk. It is important to note that optimization considers only the existing assets and reallocates them to improve efficiency. Investors should periodically reassess their portfolio to ensure it remains aligned with their risk tolerance and financial goals.
Dividends
- Vanguard Total Stock Market Index Fund ETF Shares 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Weighted yield (per year) 1.54%
The portfolio's dividend yield stands at 1.54%, with the U.S. component yielding 1.2% and the international component 2.9%. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. Reinvesting dividends can enhance compounding growth over time. Investors focused on income might consider increasing exposure to higher-yielding assets, while those prioritizing growth may focus on capital appreciation.
Ongoing product costs
- 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 benefits from low costs, with an average expense ratio of 0.04%. Low costs are crucial for maximizing long-term returns, as they reduce the drag on performance. Vanguard's ETFs are known for their cost-effectiveness, allowing investors to keep more of their returns. While the current cost structure is efficient, investors should remain vigilant about any changes in fees and seek to maintain or reduce costs where possible to enhance net returns.
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