A balanced portfolio with strong U.S. focus and moderate risk exposure

Report created on Jan 11, 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 primarily composed of ETFs, with a significant 45% allocation to the Vanguard S&P 500 ETF. This is complemented by smaller allocations to U.S. Small Cap and International Stock ETFs. The structure is typical for a balanced portfolio, aiming to capture broad market exposure while maintaining moderate risk. Compared to common benchmarks, it aligns well with a diversified strategy, though it leans heavily on U.S. equities. This composition is beneficial for capturing U.S. market growth but may benefit from further diversification into other asset classes like bonds for risk management.

Growth Info

Historically, this portfolio has achieved a Compound Annual Growth Rate (CAGR) of 8.8%, which is commendable. However, it experienced a maximum drawdown of -23.96%, indicating vulnerability during market downturns. This performance is relatively strong compared to typical balanced portfolios, which often aim for steady growth with moderate risk. Historical data, while insightful, isn't predictive of future returns, but it does highlight the portfolio's resilience and potential for growth. To mitigate drawdown risk, consider incorporating more defensive assets or increasing cash reserves.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future outcomes, suggests a 50th percentile potential growth of 103.13% and a 67th percentile of 172.17%. This indicates a positive outlook, with 833 out of 1,000 simulations showing positive returns. However, the 5th percentile projects a potential loss of -37.49%, underscoring the inherent uncertainty. While simulations offer a glimpse into possible futures, they rely on past data and assumptions. To prepare for a range of outcomes, consider adjusting asset allocations to align with personal risk tolerance and goals.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted towards stocks, with 99.48% in equities, leaving minimal exposure to other asset classes like bonds or cash. This allocation maximizes growth potential but may increase volatility. Compared to typical balanced portfolios, which often include a mix of stocks and bonds, this portfolio is more aggressive. To enhance diversification and reduce risk, consider incorporating more bonds or alternative investments. This can help stabilize returns during market downturns and provide a buffer against equity volatility.

Sectors Info

  • Technology
    20%
  • Financials
    19%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    8%
  • Energy
    7%
  • Basic Materials
    6%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is well-distributed, with notable weights in Technology (19.7%), Financial Services (18.9%), and Industrials (12.9%). This diversification aligns with common benchmarks, reducing sector-specific risk. However, the portfolio is slightly tech-heavy, which could lead to increased volatility, especially during periods of interest rate hikes. To maintain balance, consider periodically reviewing sector exposure and adjusting allocations to reflect changing economic conditions and personal investment goals. This proactive approach can help mitigate potential risks associated with sector concentration.

Regions Info

  • North America
    67%
  • Europe Developed
    12%
  • Japan
    6%
  • Asia Emerging
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic exposure is predominantly North American (67.08%), with limited allocations to Europe, Japan, and emerging markets. This strong U.S. focus captures domestic growth but may miss out on international opportunities. Compared to global benchmarks, the portfolio's geographic diversification is limited. Increasing exposure to non-U.S. markets can enhance diversification and capture growth in other regions. Consider gradually increasing allocations to underrepresented areas, such as emerging markets, to balance regional risks and opportunities.

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, which identifies the best possible risk-return ratio based on current assets. This approach focuses on maximizing returns for a given level of risk. While the portfolio is already well-balanced, slight adjustments in asset allocations can further enhance efficiency. Regularly reassess the portfolio's positioning on the Efficient Frontier to ensure it aligns with personal risk tolerance and investment goals. This ongoing optimization can help maintain a balance between risk and return, supporting long-term growth.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.40%
  • Avantis® Emerging Markets Value ETF 1.10%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 2.08%

With a total dividend yield of 2.08%, the portfolio provides moderate income potential. The Vanguard Total International Stock Index Fund ETF and Avantis International Small Cap Value ETF contribute significantly to this yield. Dividends can offer a steady income stream, which is beneficial for investors seeking regular cash flow. While the yield is reasonable, it may not be the primary focus for growth-oriented investors. To increase income potential, consider adding higher-yielding assets or dividend-focused funds, balancing growth with income needs.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio (TER) is impressively low at 0.13%, with the Vanguard S&P 500 ETF contributing minimally at 0.03%. Low costs are advantageous, as they enhance long-term returns by reducing the drag on performance. Compared to industry averages, this portfolio's costs are well-managed, aligning with best practices. Maintaining low expenses is crucial for optimizing returns, so regularly review fund fees and consider lower-cost alternatives if available. This vigilance can help preserve capital and improve overall investment outcomes.

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