A growth-focused portfolio with strong US equity exposure and moderate diversification

Report created on Jan 5, 2025

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

This portfolio is heavily weighted towards equities, comprising 92% of the total allocation, with a minor bond allocation of 7%. It features a mix of large-cap, small-cap, and international stocks, alongside a modest bond component. Compared to a typical balanced portfolio, this allocation leans more aggressively towards equities, which is common in growth-focused strategies. This structure aims to capture long-term capital appreciation, but it may also introduce higher volatility. To balance potential risks, consider gradually increasing bond exposure, especially as you approach your investment goals or retirement.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 14.63%, outperforming many traditional benchmarks. However, it has experienced significant volatility, with a maximum drawdown of -32.92%. This indicates that while the portfolio has high growth potential, it is also susceptible to substantial declines during market downturns. Understanding this trade-off is crucial for investors who prioritize growth but must be prepared for periods of negative performance. Diversifying further or incorporating more defensive assets could help mitigate future drawdowns.

Projection Info

Using Monte Carlo simulations, which project future outcomes based on historical data, the portfolio's potential performance varies widely. With a median projection suggesting a 392.1% increase, it shows promise for substantial growth. However, the 5th percentile indicates a much lower potential return of 22.1%, highlighting the uncertainty and risk involved. These projections assume that past trends will continue, which is not guaranteed. Regularly reviewing the portfolio and adjusting allocations based on changing market conditions and personal circumstances is advisable.

Asset classes Info

  • Stocks
    92%
  • Bonds
    7%
  • Cash
    1%

The asset class distribution heavily favors stocks, with minimal exposure to bonds and negligible cash holdings. This allocation is typical for growth-oriented portfolios, aiming to maximize capital appreciation. However, the lack of significant bond or alternative asset exposure could lead to increased volatility. Comparing this to more balanced portfolios, which often include a higher proportion of bonds, suggests that adding more fixed-income assets could provide stability and income, especially important during market downturns or for investors nearing retirement.

Sectors Info

  • Technology
    23%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio is notably concentrated in the technology sector, which comprises over 23% of the total allocation. This sectoral bias can lead to higher volatility, particularly during periods of regulatory changes or technological shifts. While tech has been a strong performer historically, diversification across other sectors such as healthcare and financial services could reduce risk. Aligning sector weights more closely with global benchmarks may also help achieve a more balanced risk-return profile, protecting against sector-specific downturns.

Regions Info

  • North America
    79%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North American markets, with over 78% exposure. This concentration aligns with many US-based investors' preferences for domestic equities. However, it limits the benefits of international diversification, which can provide exposure to different economic cycles and growth opportunities. Increasing allocations to underrepresented regions like Europe and Asia could enhance diversification and potentially improve risk-adjusted returns. This approach can help mitigate the impact of regional downturns on the overall portfolio performance.

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 could potentially be optimized using the Efficient Frontier, which identifies the best risk-return trade-off for a given set of assets. This optimization process suggests reallocating existing assets to achieve a more favorable risk-return ratio. However, it's important to note that this approach focuses solely on current assets and their allocations, not on diversification or other investment goals. Regularly reviewing the portfolio and adjusting allocations can help maintain an optimal balance as market conditions change.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.98%

The portfolio's dividend yield is 1.98%, with contributions primarily from dividend-focused ETFs. Dividends provide a steady income stream, which can be reinvested to enhance growth or withdrawn to supplement income. For growth-focused investors, dividends can offer a cushion during market volatility, helping to offset potential capital losses. To maximize this benefit, consider maintaining or increasing exposure to high-dividend-yielding assets, which can provide a reliable income source while still pursuing growth.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • 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 impressively low at 0.06%, aligning with best practices for cost-effective investing. Low costs are crucial for long-term performance, as they allow more of the investment returns to compound over time. This efficient cost structure enhances the portfolio's growth potential, especially when compared to higher-cost alternatives. Maintaining this low-cost focus is advisable, as it supports better net returns, allowing you to achieve your financial goals more effectively.

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