Growth-Oriented Portfolio with High Correlation and Broad Diversification Across Global Markets

Report created on Jun 14, 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 composed of five Vanguard ETFs, each holding a 20% allocation. These funds provide broad exposure to various market segments, focusing on small-cap, tech, S&P 500, total stock market, and international stocks. This composition highlights a strong focus on equities, aiming for growth with a significant allocation to U.S. markets. While the diversification across funds is broad, the equal weighting may not fully capitalize on market opportunities or manage risks effectively. Considering rebalancing the allocations could enhance the portfolio's performance and better align with your risk tolerance and investment goals.

Growth Info

Historically, the portfolio has demonstrated a robust performance with a CAGR of 13.43%. However, it experienced a significant max drawdown of -34.83%, indicating potential volatility during market downturns. This performance suggests a strong growth potential but also highlights the risks associated with a growth-oriented strategy. To mitigate the impact of such drawdowns, consider incorporating assets that provide stability during market turbulence. This approach can help maintain a balanced risk-return profile, ensuring the portfolio remains aligned with long-term investment objectives.

Projection Info

Using a Monte-Carlo simulation with 1,000 scenarios, the portfolio's future performance shows promising potential. The 50th percentile projects a substantial 412.67% return, with 989 simulations yielding positive outcomes. This analysis suggests a high likelihood of achieving favorable returns, reinforcing the portfolio's growth orientation. However, the 5th percentile indicates a potential downside of 50.28%, underscoring the importance of managing risk. Diversifying further or adjusting current allocations can help navigate uncertainties and capitalize on growth opportunities while maintaining a cautious approach.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 99.33% of the total allocation. This strong equity focus aligns with a growth strategy, aiming for capital appreciation. However, the lack of fixed-income or alternative investments may increase vulnerability to market volatility. Introducing bonds or other asset classes could reduce risk and provide a buffer during downturns. This balanced approach can enhance the portfolio's resilience, ensuring it remains aligned with long-term goals while managing risk effectively.

Sectors Info

  • Technology
    38%
  • Financials
    12%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Health Care
    9%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Real Estate
    3%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%

Sector allocation is dominated by technology, making up 38.35% of the portfolio, followed by financial services and industrials. This concentration in tech reflects a growth-oriented strategy but also exposes the portfolio to sector-specific risks. While tech has strong growth potential, diversifying into other sectors can mitigate risks associated with market fluctuations. A more balanced sector allocation could provide stability and reduce the impact of adverse events in any single sector, enhancing overall portfolio performance.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asien Schwellenländer
    3%
  • Japan
    3%
  • Asien
    2%
  • Australasia
    1%
  • Afrika/Mittlerer Osten
    1%

Geographically, the portfolio is heavily invested in North America, with 80.92% exposure. This reflects a strong bias towards U.S. markets, which can benefit from domestic growth but may limit exposure to global opportunities. While the U.S. market offers stability and growth, expanding into other regions can provide diversification benefits and access to emerging market potential. A more balanced geographic allocation can enhance risk management and capitalize on global growth opportunities, aligning with a comprehensive investment strategy.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Information Technology Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard Small-Cap Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation among assets, particularly between the S&P 500, tech, total stock market, and small-cap funds. This correlation suggests limited diversification benefits, as these assets tend to move in tandem. Reducing overlap by introducing less correlated assets can enhance diversification and reduce risk. A more diversified portfolio can improve resilience against market volatility, ensuring consistent performance across different market conditions. This approach can help maintain a balanced risk-return profile, aligned with long-term investment objectives.

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.

Before optimizing, focus on reducing asset overlap due to high correlation, which limits diversification benefits. By moving along the efficient frontier, you can adjust the portfolio's risk profile. To increase risk, allocate more to equities, while for a conservative approach, consider adding bonds. This strategy can enhance the portfolio's efficiency, aligning with your risk tolerance and financial goals. Remember, maintaining a balanced risk-return profile is key to long-term success.

Dividends Info

  • Vanguard Small-Cap Index Fund ETF Shares 1.30%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.48%

The portfolio's dividend yield stands at 1.48%, with the international stock index fund contributing the highest yield of 3.0%. While dividends provide a steady income stream, the overall yield is relatively modest, reflecting the growth-oriented nature of the portfolio. To enhance income generation, consider incorporating higher-yielding assets or funds. This strategy can provide additional cash flow, supporting reinvestment or income needs while maintaining the portfolio's growth focus.

Ongoing product costs Info

  • Vanguard Small-Cap Index Fund ETF Shares 0.05%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • 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) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, reflecting the low-cost nature of Vanguard ETFs. This cost efficiency is beneficial for long-term growth, as lower expenses can significantly impact returns over time. Maintaining low costs is crucial for optimizing performance, ensuring that more of the portfolio's returns are retained. Continuously monitoring and managing investment costs can enhance overall returns, aligning with the objective of maximizing growth while minimizing expenses.

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