A balanced portfolio with global exposure and a focus on US equities

Report created on Jan 16, 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 heavily weighted towards equities, with Vanguard Total World Stock Index Fund ETF Shares comprising approximately 73% and Vanguard S&P 500 ETF making up about 27%. This composition leans towards a growth-oriented strategy, reflecting a typical balanced profile. Compared to common benchmarks, this portfolio is more concentrated in stocks, providing potential for higher returns but also increased volatility. To enhance balance, consider introducing other asset classes such as bonds or real estate, which could reduce risk and stabilize returns over time.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 11.56%, which is impressive and indicates strong past performance. However, the maximum drawdown of -34.12% highlights the potential for significant losses during market downturns. Compared to benchmarks, the growth rate is competitive, but the drawdown suggests a need for risk management. Diversifying into less volatile asset classes could help mitigate such drawdowns, providing a more stable performance during turbulent market conditions.

Projection Info

Forward projections using Monte Carlo simulations offer insights into potential future outcomes based on historical data. With 1,000 simulations, the portfolio shows a wide range of possible returns, from 52.36% at the 5th percentile to 544.21% at the 67th percentile. While the median projection is promising, it's important to note that these simulations are based on past data, which doesn't guarantee future results. Regularly reviewing and adjusting the portfolio based on changing market conditions can help align with desired outcomes.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly invested in stocks, accounting for over 99% of the allocation. This concentration in a single asset class suggests high exposure to equity market risks. While stocks have historically provided strong returns, they can also be volatile. Introducing other asset classes like bonds or commodities could enhance diversification and reduce overall portfolio risk. Such diversification can help buffer against stock market fluctuations, providing more consistent returns over time.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    3%

The sector allocation is well-distributed across various industries, with notable concentrations in technology (26.74%), financial services (15.43%), and consumer cyclicals (10.75%). This sectoral balance aligns closely with common benchmarks, indicating a diversified approach. However, the heavy reliance on technology could lead to higher volatility, especially during interest rate changes. Consider monitoring sector performance and adjusting allocations to ensure alignment with market trends and personal risk tolerance.

Regions Info

  • North America
    75%
  • Europe Developed
    11%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic exposure is heavily skewed towards North America, which represents approximately 75% of the allocation. While this provides stability due to the mature markets, it limits exposure to growth opportunities in emerging markets. By increasing allocations to regions like Asia or Latin America, you could enhance diversification and tap into higher growth potential. This geographic balance can help mitigate risks associated with regional economic downturns, providing a more globally diversified portfolio.

Redundant positions Info

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

The portfolio's assets are highly correlated, particularly between the Vanguard Total World Stock Index Fund ETF Shares and the Vanguard S&P 500 ETF. High correlation means these assets tend to move in the same direction, limiting diversification benefits. During market downturns, this could result in amplified losses. To reduce correlation and improve diversification, consider adding assets with low or negative correlation, such as bonds or alternative investments, which can provide a buffer against market volatility.

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 be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. However, given the high correlation between the two ETFs, diversification benefits are limited. Before optimization, consider reducing overlapping assets to enhance diversification. The Efficient Frontier can then be used to adjust allocations, aiming for an optimal balance between risk and return, tailored to personal investment goals and risk tolerance.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.71%

The portfolio's dividend yield stands at 1.71%, with contributions from both ETFs. Dividends can provide a steady income stream, which is beneficial for investors seeking regular cash flow. Compared to the broader market, this yield is moderate, offering some income while maintaining growth potential. For those prioritizing income, exploring higher-yielding assets could enhance returns. However, it's crucial to balance yield with risk, as higher yields often come with increased volatility.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.06%

The portfolio benefits from low costs, with a Total Expense Ratio (TER) of 0.06%. This is impressively low and aligns with best practices for cost efficiency, supporting better long-term performance. Low fees mean more of your money stays invested, compounding over time. Continuously monitoring and comparing costs with similar funds can ensure ongoing cost-effectiveness. If opportunities arise to swap high-fee assets for lower-cost alternatives, it could further enhance net returns.

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