Portfolio report
A growth-focused portfolio with strong US exposure and moderate risk for long-term investors
Report created on Dec 12, 2024The briefing
What stands out
Consider adding fixed-income assets to balance risk and enhance diversification, like bonds or REITs.
Explore increasing international exposure to capture growth opportunities outside the US market.
Review sector allocations periodically to ensure alignment with market trends and personal objectives.
Highlights from the assessment. Explore the analysis below for context and assumptions.
Risk profile
5/7
Diversification profile
4/5
The starting point
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 50.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 15.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 15.00% -
SC Schwab U.S. Dividend Equity ETF
SCHD - US8085247976 10.00% -
VW Vanguard FTSE Emerging Markets Index Fund ETF Shares
VWO - US9220428588 5.00% -
XM Invesco S&P MidCap Momentum ETF
XMMO - US46137V4648 5.00%
This portfolio is heavily weighted towards US equities, with a significant 50% allocation to the Vanguard S&P 500 ETF. The rest of the portfolio is diversified across small-cap, international, dividend, emerging markets, and mid-cap momentum ETFs, providing broad exposure to different market segments. The high allocation to stocks (over 99%) indicates a focus on capital appreciation. This composition is relevant for investors seeking growth, as equities typically offer higher returns over the long term compared to other asset classes. To enhance diversification, consider adding other asset classes like bonds or real estate, which can help mitigate risk during market downturns.
Growth
Historically, the portfolio has delivered a strong compound annual growth rate (CAGR) of 15.76%, indicating robust performance over time. However, it also experienced a significant maximum drawdown of -35.59%, reflecting vulnerability during market downturns. This performance suggests that while the portfolio has the potential for high returns, it can also face considerable volatility. Understanding these dynamics is crucial for setting realistic expectations. To manage risk, consider strategies like dollar-cost averaging or rebalancing to maintain the desired asset allocation and potentially reduce the impact of market fluctuations.
Drawdowns
- Worst fall 02/12/2020 – 03/23/2020 -35.6%
- Time from the high to the bottom 40 days
- Time back to the previous high 08/26/2020 156 days
- Today, below the last high -0.4%
Worst falls
- 02/12/2020 – 03/23/2020 Back at the high after 196 days -35.6%
- 01/04/2022 – 09/30/2022 Back at the high after 708 days -23.0%
- 09/02/2020 – 09/23/2020 Back at the high after 40 days -8.3%
- 07/16/2024 – 08/05/2024 Back at the high after 65 days -7.9%
- 10/12/2020 – 10/28/2020 Back at the high after 24 days -6.6%
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, suggests a wide range of potential returns for this portfolio. With 1,000 simulations, the median (50th percentile) return is projected at 440.12%, but the 5th percentile is much lower at 33.6%. This indicates variability in potential outcomes, highlighting the importance of considering different scenarios. While historical data can provide insights, it's not a guarantee of future performance. To navigate uncertainty, regularly review the portfolio and adjust based on changes in market conditions or personal financial goals.
Asset classes
- Stocks 100%
The portfolio is predominantly composed of stock assets, with a negligible allocation to cash and other categories. This heavy emphasis on equities aligns with a growth strategy, aiming for higher returns over time. However, such concentration can increase exposure to market volatility. Diversification across various asset classes can help balance risk and return, providing stability during market fluctuations. Consider incorporating fixed-income securities or alternative investments to enhance diversification and potentially reduce portfolio volatility, aligning with a more balanced risk-reward profile.
Sectors
- Technology 22%
- Financials 18%
- Industrials 12%
- Consumer Discretionary 12%
- Health Care 9%
- Telecommunications 7%
- Consumer Staples 6%
- Energy 6%
- Basic Materials 4%
- Utilities 2%
- Real Estate 2%
Sector allocation is relatively balanced, with notable exposure to technology, financial services, and industrials. These sectors can drive growth but also introduce sector-specific risks. For instance, technology can be volatile due to rapid innovation cycles, while financials are sensitive to interest rate changes. Understanding sector dynamics is crucial for managing risk and capitalizing on growth opportunities. To mitigate sector-specific risks, consider periodically reviewing and adjusting sector allocations based on market trends and economic outlook, ensuring alignment with investment objectives and risk tolerance.
Regions
- North America 75%
- Europe Developed 6%
- Asia Emerging 6%
- Asia Developed 3%
- Japan 2%
- Africa/Middle East 1%
- Latin America 1%
- Australasia 1%
The portfolio has a strong geographic focus on North America, accounting for over 75% of the allocation. This concentration provides exposure to the US market, known for its economic resilience and innovation. However, it also limits diversification benefits from other regions. Geographic diversification can reduce portfolio risk by spreading investments across different economic environments. Consider increasing exposure to emerging markets or other developed regions to capture growth opportunities and hedge against potential downturns in the US market, enhancing overall portfolio resilience.
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 may benefit from optimization using the Efficient Frontier, which identifies the best possible risk-return ratio for a given set of assets. By adjusting the allocation among existing holdings, the portfolio could achieve a more optimal balance between risk and return. This process involves analyzing historical returns, volatility, and correlations to determine the most efficient allocation. While optimization can enhance performance, it's essential to consider transaction costs and tax implications when making changes. Regularly review the portfolio's efficiency and adjust as needed to maintain alignment with investment goals.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.50%
- Schwab U.S. Dividend Equity ETF 2.60%
- Vanguard S&P 500 ETF 1.20%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
- Vanguard Total International Stock Index Fund ETF Shares 2.90%
- Invesco S&P MidCap Momentum ETF 0.30%
- Weighted yield (per year) 1.66%
The portfolio's overall dividend yield is 1.66%, with contributions from various ETFs. Dividend income can provide a steady cash flow, enhancing total returns and offering a buffer during market downturns. While growth-focused, incorporating dividend-paying assets can add stability and income potential. To optimize dividend income, consider reinvesting dividends to capitalize on compounding returns over time. Additionally, periodically review dividend yields and payout ratios to ensure they align with income goals and risk tolerance, adjusting holdings as needed.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Schwab U.S. Dividend Equity ETF 0.06%
- Vanguard S&P 500 ETF 0.03%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Invesco S&P MidCap Momentum ETF 0.34%
- Weighted costs total (per year) 0.09%
The total expense ratio (TER) of the portfolio is 0.09%, which is relatively low and favorable for long-term investors. Lower costs mean more of the investment returns are retained, enhancing compounding over time. Managing investment costs is critical for maximizing returns. To further reduce costs, consider evaluating the expense ratios of individual ETFs and exploring lower-cost alternatives if available. Additionally, monitor any changes in fees and expenses, ensuring they remain competitive and aligned with the overall investment strategy and objectives.
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