Growth-oriented portfolio with strong U.S. focus and broad diversification but high risk exposure

Report created on Dec 5, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is dominated by a 60% allocation to the Vanguard S&P 500 ETF, complemented by a 20% stake in Avantis® U.S. Small Cap Value ETF and a 20% allocation to Vanguard Total International Stock Index Fund ETF Shares. This setup emphasizes a strong preference for U.S. equities, with a slight tilt towards small-cap value and international diversification. The portfolio is broadly diversified across asset classes and sectors but remains heavily weighted towards equities, which aligns with a growth-oriented investment strategy. The allocation reflects a moderate to high-risk appetite, seeking long-term capital appreciation.

Growth Info

Historically, the portfolio has delivered an impressive compound annual growth rate (CAGR) of 16.25%, albeit with a significant maximum drawdown of -36.31%. This volatility indicates that while the portfolio has the potential for substantial returns, it also carries the risk of considerable losses during market downturns. The concentration of returns in just 16 days suggests that the portfolio's performance is driven by a few high-impact events. Investors should be prepared for periods of high volatility and should have the patience to ride out short-term market fluctuations in pursuit of long-term gains.

Projection Info

Using a Monte Carlo simulation, which runs multiple scenarios to predict future performance, the portfolio shows promising potential. With a hypothetical initial investment, the median projection suggests a 521.97% return, while even the lower 5th percentile still predicts a positive 30.99% return. This indicates a high likelihood of positive outcomes, with 973 out of 1,000 simulations yielding gains. The annualized return across all simulations is 16.98%, reinforcing the portfolio's growth potential. However, investors should remain aware of the inherent uncertainties and maintain a long-term perspective to weather possible market volatility.

Asset classes Info

  • Stocks
    100%

The portfolio's asset class allocation is heavily skewed towards stocks, with a staggering 99.62% allocation. This reflects a high-risk, high-reward strategy typical of growth-oriented portfolios. While this concentration can drive substantial returns during bull markets, it also exposes the portfolio to significant risks during downturns. Investors should consider their risk tolerance and potentially diversify into other asset classes, such as bonds or real estate, to mitigate volatility. Balancing the portfolio with a mix of asset classes can help achieve a more stable return profile over time.

Sectors Info

  • Technology
    24%
  • Financials
    18%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Energy
    6%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation in the portfolio is diverse, with a notable emphasis on Technology (23.68%), Financial Services (17.70%), and Consumer Cyclicals (11.47%). This sector spread provides exposure to various economic cycles and growth opportunities. However, the heavy concentration in technology can amplify risk, given its sensitivity to market and economic shifts. To mitigate sector-specific risks, investors might consider rebalancing the portfolio to ensure a more even distribution across sectors. A well-balanced sector allocation can enhance resilience against market fluctuations and provide more consistent performance.

Regions Info

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

Geographically, the portfolio is predominantly focused on North America, accounting for 80.77% of the allocation. This strong U.S. bias reflects confidence in the American market but also limits exposure to international growth opportunities. While the inclusion of international stocks adds some diversification, the overall exposure to regions like Europe, Asia, and emerging markets is relatively modest. Investors seeking to broaden their geographic exposure might consider increasing allocations to international markets, which can offer diversification benefits and reduce reliance on the performance of the U.S. economy alone.

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 optimization chart suggests potential for improvement by adjusting along the efficient frontier. Investors can enhance performance by balancing risk and return, moving towards a more efficient allocation. For those seeking higher returns, increasing equity exposure or exploring growth-focused assets may be viable. Conversely, those aiming for a more conservative approach can allocate more towards bonds or other less volatile assets. It's important to align these adjustments with personal risk tolerance and financial goals, ensuring the portfolio remains aligned with the investor's overall strategy and objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.60%

The portfolio offers a moderate dividend yield of 1.6%, with contributions from the Avantis® U.S. Small Cap Value ETF (1.5%), Vanguard S&P 500 ETF (1.2%), and Vanguard Total International Stock Index Fund ETF Shares (2.9%). While the primary focus of this portfolio is growth, dividend income can provide a valuable source of cash flow and reduce overall volatility. Investors may consider reinvesting dividends to take advantage of compounding returns or using them as a buffer during market downturns. Keeping an eye on dividend yields can help optimize income generation over time.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

With an overall Total Expense Ratio (TER) of 0.08%, the portfolio is cost-efficient, minimizing the drag on returns. The Vanguard S&P 500 ETF's low expense ratio of 0.03% contributes significantly to this efficiency, while the Avantis® U.S. Small Cap Value ETF's expense ratio of 0.25% is slightly higher. Keeping investment costs low is crucial for maximizing net returns, especially over the long term. Investors should regularly review expense ratios and consider cost-effective alternatives to ensure their portfolio remains efficient. Maintaining a focus on low-cost investments can enhance overall performance.

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