Balanced and Broadly Diversified Portfolio with Strong US Focus and Low Costs

Report created on Nov 29, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is a balanced mix of three ETFs, with a strong emphasis on US equities. It consists of 50% Vanguard S&P 500 ETF, 30% Vanguard Total International Stock Index Fund ETF Shares, and 20% Vanguard Total Stock Market Index Fund ETF Shares. This composition reflects a focus on large-cap US stocks with some international exposure. The portfolio's broad diversification provides a good balance between risk and return. The allocation strategy leans towards growth, with a substantial portion invested in US markets. This setup is suitable for investors seeking moderate growth with some exposure to international markets.

Growth Info

The portfolio has shown a commendable historical performance with a CAGR of 11.72%. A hypothetical initial investment would have grown significantly over time, despite experiencing a maximum drawdown of -34.04%. This indicates the portfolio's resilience in recovering from market downturns. However, it also highlights the potential volatility associated with equity-heavy portfolios. The portfolio's performance is largely driven by its exposure to the US market, which has been strong historically. Investors should be aware of the past performance but remember that it does not guarantee future results.

Projection Info

Using a Monte Carlo simulation with 1,000 simulations, the portfolio shows promising forward projections. Assuming a hypothetical initial investment, the 5th percentile projects a 40.21% return, while the median (50th percentile) projects a 310.14% return. The 67th percentile projects a 436.01% return, suggesting a wide range of potential outcomes. The simulation indicates that 985 out of 1,000 simulations resulted in positive returns, with an annualized return of 12.01%. This demonstrates the portfolio's potential for growth, though investors should remain mindful of market uncertainties and possible fluctuations.

Asset classes Info

  • Stocks
    99%

The portfolio is predominantly composed of stocks, accounting for 99.46% of the asset allocation. The remaining allocation includes minimal cash and other assets. This heavy stock allocation aligns with a growth-oriented strategy, aiming for capital appreciation over time. While stocks offer the potential for higher returns, they also come with increased volatility. Investors should consider their risk tolerance and investment horizon when maintaining such a stock-heavy portfolio. Diversifying into other asset classes, like bonds or real estate, could be explored to reduce risk and enhance stability.

Sectors Info

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

The portfolio covers a broad range of sectors, with technology leading at 26.56%, followed by financial services, healthcare, and consumer cyclicals. This sector allocation reflects a diversified approach, spreading risk across multiple industries. The technology sector's prominence aligns with its strong historical performance and growth potential. However, sector concentration can introduce specific risks, such as regulatory changes or market shifts. Investors should regularly review sector allocations to ensure they align with their risk tolerance and market outlook. Balancing exposure across sectors can help mitigate risks associated with individual industries.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, accounting for 71.94% of the allocation. This reflects a strong focus on US markets, which have been robust performers historically. The remaining allocation is spread across developed and emerging markets, providing some international diversification. While this geographic distribution offers exposure to global growth opportunities, it also introduces currency and geopolitical risks. Investors should consider the potential impact of regional economic conditions on their portfolio. Diversifying further into other regions could enhance the portfolio's resilience against localized market downturns.

Redundant positions Info

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

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. This correlation suggests limited diversification benefits as these assets tend to move in the same direction. While correlation is expected within a stock-heavy portfolio, reducing overlap can enhance diversification. Investors might consider adding assets with lower correlations to achieve a more balanced risk-return profile. A diversified portfolio with less correlated assets can help mitigate losses during market downturns and improve overall stability.

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 by addressing the high correlation between certain assets, which currently offer limited diversification benefits. By moving along the efficient frontier, the investor can either increase risk for potentially higher returns or reduce risk for more stability. However, before optimization, the focus should be on reducing overlap and enhancing diversification. This could involve incorporating assets with lower correlations or different asset classes. Once diversification is improved, the investor can explore optimization strategies to align the portfolio with their specific risk tolerance and financial goals.

Dividends Info

  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.74%

The portfolio offers a total dividend yield of 1.74%, with contributions from each of the three ETFs. The Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares both yield 1.2%, while the Vanguard Total International Stock Index Fund ETF Shares yields 3.0%. This dividend income provides a modest level of cash flow, which can be reinvested or used for other financial needs. While dividends can enhance total returns, they should not be the sole focus of a growth-oriented portfolio. Investors should balance dividend income with capital appreciation goals.

Ongoing product costs Info

  • Vanguard S&P 500 ETF 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) 0.04%

The portfolio is cost-efficient, with an overall Total Expense Ratio (TER) of 0.04%. The Vanguard S&P 500 ETF and Vanguard Total Stock Market Index Fund ETF Shares both have a low cost of 0.03%, while the Vanguard Total International Stock Index Fund ETF Shares has a slightly higher cost of 0.08%. These low costs are beneficial for long-term investors, as they help maximize net returns. Keeping investment costs low is crucial for achieving financial goals. Investors should continue to monitor expenses and seek cost-effective investment options to maintain portfolio efficiency.

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