A balanced portfolio with strong US focus and low-cost ETFs for long-term growth

Report created on Dec 29, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists of two major ETFs: Vanguard S&P 500 ETF (75%) and Vanguard Total International Stock Index Fund ETF Shares (25%). This allocation heavily favors US equities, aligning with a typical balanced approach that seeks stability through established markets. While this composition provides a solid foundation, it lacks exposure to bonds or alternative assets, which could offer additional stability. Considering adding other asset classes may enhance diversification and reduce volatility.

Growth Info

With a historical Compound Annual Growth Rate (CAGR) of 12.2%, the portfolio has shown robust growth. The max drawdown of -33.86% highlights potential risks during market downturns, which is common for equity-heavy portfolios. Comparing this to benchmarks like the S&P 500, the performance is commendable. However, it's important to remember that past performance doesn't guarantee future success. Regularly reviewing performance against personal goals can help ensure the portfolio remains aligned with your objectives.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, indicates a median annualized return of 10.53%. This suggests potential for continued growth, though it's important to note that simulations are not foolproof and rely on past data. The 5th percentile return of 14.53% indicates a low probability of negative outcomes. However, it's crucial to remain aware of potential market changes that could impact these projections and adjust the strategy accordingly.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly composed of stocks, with a minor allocation to cash and other assets. This concentration in equities aligns with a growth-oriented strategy but may increase volatility. Diversifying into other asset classes like bonds or real estate could help manage risk and provide more stable returns. While stocks offer higher growth potential, balancing them with other assets can create a more resilient portfolio, especially during market fluctuations.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is well-distributed across various industries, with a notable concentration in technology (28%) and financial services (15%). This mirrors common market benchmarks, suggesting a balanced exposure to different economic drivers. However, the tech-heavy focus could lead to increased volatility, especially during periods of regulatory changes or interest rate hikes. Regularly reviewing sector exposure can help ensure alignment with broader market trends and personal risk tolerance.

Regions Info

  • North America
    77%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic allocation is heavily skewed towards North America (77%), with limited exposure to other regions. This concentration may limit diversification benefits and expose the portfolio to regional economic risks. Increasing international exposure could enhance diversification and capture growth opportunities in emerging markets. Consider assessing global market trends to determine if adjustments to geographic allocation align with your long-term investment goals.

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 versus return profile can be optimized using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. Adjusting the allocation between existing assets could improve efficiency without altering the portfolio's overall structure. This approach focuses on maximizing returns for a given level of risk, ensuring the portfolio remains aligned with your financial goals while maintaining a balance between growth and stability.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.72%

The portfolio's dividend yield stands at 1.72%, with the international fund contributing a higher yield than the S&P 500 ETF. Dividends can provide a steady income stream and cushion against market volatility. While the yield is modest, reinvesting dividends can enhance compounding effects over time. For those seeking income, exploring higher-yielding investments or dividend-focused strategies may be beneficial, depending on your financial objectives.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio benefits from impressively low costs, with a total expense ratio (TER) of 0.04%. This aligns with best practices for maximizing returns by minimizing fees. Low costs are crucial for long-term growth, as they prevent erosion of returns. Maintaining this cost efficiency is advantageous, but it's also worth periodically reviewing the expense ratios of alternative investments to ensure continued cost-effectiveness as market conditions change.

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