A growth-focused portfolio with strong US market emphasis and moderate international diversification

Report created on Dec 7, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio primarily consists of three ETFs, with a significant 60% allocation to a broad US stock market index fund. It includes a 20% allocation to a small-cap value ETF and another 20% to an international stock index fund. This structure leans heavily towards equities, indicating a growth-oriented approach. Such a composition can be beneficial for capturing overall market growth but may expose the portfolio to higher volatility. To balance this, consider gradually incorporating other asset classes, like bonds or real estate, to mitigate risk without sacrificing growth potential.

Growth Info

Historically, this portfolio has delivered a robust compound annual growth rate (CAGR) of 15.94%, albeit with a maximum drawdown of -36.88%. This suggests that while the portfolio has performed well over the long term, it is susceptible to significant short-term fluctuations. Understanding these performance metrics is crucial, as they highlight the potential for high returns alongside the risk of substantial losses. Investors should prepare for such volatility and consider strategies to manage drawdowns, such as diversification or tactical asset allocation changes.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance is projected with potential outcomes ranging from a 5th percentile return of 40.6% to a 67th percentile return of 840.33%. These simulations use historical data to model various scenarios, providing a probabilistic view of future returns. While helpful, it's important to remember that past performance doesn't guarantee future results, and unexpected market conditions can alter these projections. Regularly reviewing and adjusting the portfolio based on changing market dynamics and personal goals is recommended.

Asset classes Info

  • Stocks
    100%

The portfolio predominantly consists of stocks, with a negligible allocation to cash and other asset classes. This heavy stock allocation aligns with a growth-focused strategy, aiming for capital appreciation over the long term. However, this also means the portfolio is more vulnerable to stock market volatility. Introducing other asset classes, such as fixed income or commodities, could provide a buffer against market downturns and reduce overall risk. Diversifying asset classes can help achieve a more balanced risk-return profile.

Sectors Info

  • Technology
    22%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Telecommunications
    7%
  • Energy
    6%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    2%

Sector-wise, the portfolio is diversified across various industries, with notable concentrations in technology, financial services, and industrials. This sectoral spread can provide resilience against sector-specific downturns, but high exposure to technology may increase risk during market corrections. Investors should monitor sector performance and consider rebalancing if any sector becomes overly dominant. A balanced sector allocation can enhance the portfolio's stability and reduce the impact of sector-specific volatility.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily weighted towards North America, with 80.85% exposure, complemented by smaller allocations to developed Europe and Asia. This concentration on North America reflects a bias towards the US market, which can be advantageous given its historical performance. However, it also limits exposure to potential growth in emerging markets. To enhance geographic diversification, consider gradually increasing exposure to underrepresented regions, such as Asia or Latin America, which may offer higher growth potential.

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.

Optimization using the Efficient Frontier suggests potential adjustments within the current asset mix to achieve a better risk-return balance. This involves reallocating existing assets rather than introducing new ones, aiming for the optimal trade-off between risk and return. While this approach can enhance efficiency, it's important to align any changes with personal investment goals and risk tolerance. Optimization is a dynamic process, requiring periodic review to ensure alignment with evolving market conditions and individual objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.60%

With a total dividend yield of 1.6%, this portfolio provides moderate income through dividends. The international stock index fund offers the highest yield at 2.9%, enhancing income potential. Dividends can be a valuable source of return, especially during periods of market volatility. Reinvesting dividends can compound returns over time, supporting long-term growth objectives. Investors might consider increasing exposure to higher-yielding assets if income generation becomes a priority.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • 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) 0.08%

The portfolio's total expense ratio (TER) is 0.08%, indicating low costs relative to many investment options. This is a positive aspect, as lower costs can significantly enhance net returns over time. The Avantis U.S. Small Cap Value ETF has the highest individual cost at 0.25%, but it remains reasonable given its potential for higher returns. Regularly reviewing and minimizing investment costs is crucial, as even small savings can compound into substantial benefits over the long term.

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