A balanced portfolio with strong diversification and moderate risk for long-term growth

Report created on Dec 18, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

This portfolio is composed of two Vanguard funds: the Balanced Index Fund Admiral Shares at 64% and the International Growth Fund Admiral Shares at 36%. The allocation leans heavily on balanced and growth strategies, offering a mix of equity and fixed income. The portfolio's structure is designed to provide a steady growth path while maintaining a level of risk that aligns with a balanced investment strategy. This composition is crucial as it ensures a blend of stability from bonds and growth potential from equities, which can be particularly appealing to investors seeking moderate risk exposure.

Growth Info

Over the years, this portfolio has demonstrated a commendable compound annual growth rate (CAGR) of 8.97%, suggesting robust historical performance. This means that an initial investment would have grown significantly over time, showcasing the portfolio's ability to generate returns. However, it's important to note the maximum drawdown of -33.14%, indicating potential volatility during market downturns. This historical performance underscores the need for investors to remain patient and committed to their long-term investment strategy, especially during periods of market stress.

Projection Info

The Monte Carlo simulation, using 1,000 simulations, projects a range of potential outcomes for this portfolio. With an annualized return of 9.7%, the simulation suggests a positive outlook, with 975 simulations yielding positive returns. The 5th percentile projects a modest 16.33% return, while the 67th percentile indicates a potential 319.08% return. These projections rely on historical data, which may not predict future performance accurately. Nonetheless, this analysis helps investors understand potential risks and rewards, emphasizing the importance of maintaining a diversified and balanced investment approach.

Asset classes Info

  • Stocks
    74%
  • Bonds
    24%
  • Cash
    1%

The portfolio's asset allocation includes 74.28% in stocks, 24.21% in bonds, and a small percentage in cash and other assets. This allocation reflects a balanced investment strategy, combining growth from equities with the stability of bonds. Such a mix is essential for achieving diversification, which can help mitigate risk and enhance returns over time. Investors should consider maintaining this balance to ensure that their portfolio is well-positioned to weather market fluctuations while still capitalizing on growth opportunities.

Sectors Info

  • Technology
    29%
  • Consumer Discretionary
    16%
  • Financials
    12%
  • Health Care
    11%
  • Industrials
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%
  • Basic Materials
    2%

Sector allocation within the portfolio is diverse, with significant exposure to technology (29.43%), consumer cyclical (15.64%), and financial services (12.40%). This sectoral diversity helps spread risk and capture growth across various economic segments. However, the heavy weighting in technology could expose the portfolio to sector-specific volatility. Investors might consider regularly reviewing their sector allocations to ensure alignment with their risk tolerance and investment goals, potentially rebalancing if one sector becomes overly dominant.

Regions Info

  • North America
    71%
  • Europe Developed
    15%
  • Asia Emerging
    5%
  • Asia Developed
    3%
  • Latin America
    3%
  • Japan
    2%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America, with 70.83% exposure, followed by Europe Developed and Asia Emerging. This geographic distribution provides a mix of stability from developed markets and growth potential from emerging regions. However, the concentration in North America could increase vulnerability to regional economic downturns. Investors might want to explore opportunities to enhance geographic diversification, ensuring exposure to a broader range of global markets to mitigate regional risks.

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 helps identify the best possible risk-return ratio based on current assets. This optimization involves adjusting the allocation between existing funds to achieve maximum efficiency. While this approach does not guarantee diversification, it focuses on enhancing returns relative to risk. Investors should periodically review their portfolio's position on the Efficient Frontier, making adjustments as needed to maintain an optimal balance between risk and return.

Dividends Info

  • Vanguard Balanced Index Fund Admiral Shares 2.00%
  • Weighted yield (per year) 1.28%

The portfolio benefits from a modest dividend yield, with the Vanguard Balanced Index Fund Admiral Shares offering a 2.0% yield. Dividends can provide a steady income stream, contributing to total returns, especially in low-growth environments. While dividends are not the primary focus of this portfolio, they add an element of stability and cash flow. Investors should consider reinvesting dividends to capitalize on compounding effects, enhancing long-term portfolio growth.

Ongoing product costs Info

  • Vanguard Balanced Index Fund Admiral Shares 0.07%
  • VANGUARD INTERNATIONAL GROWTH FUND ADMIRAL SHARES 0.31%
  • Weighted costs total (per year) 0.16%

The portfolio's total expense ratio (TER) is 0.16%, which is relatively low and advantageous for long-term investors. Minimizing costs is vital, as high fees can erode returns over time. The Vanguard funds' low fees reflect their commitment to cost-effective investing. Investors should continue to prioritize low-cost investment options, as reducing expenses can significantly impact net returns, particularly in a balanced portfolio aiming for steady growth.

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