Growth-Oriented Portfolio with Broad Diversification and Moderate Risk for Long-Term Investors in the USA

Report created on Jul 14, 2024

Risk profile Info

5/7
Growth
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Diversification profile Info

4/5
Broadly Diversified
← Less diversification More diversification →

Positions

The portfolio consists of three ETFs, with a major allocation to the Vanguard Total Stock Market Index Fund ETF Shares at 60%. It also includes a 30% allocation to the Vanguard Total International Stock Index Fund ETF Shares and a 10% allocation to the Avantis® U.S. Small Cap Value ETF. This composition indicates a strong preference for equity investments, which can offer high growth potential. The mix of domestic and international exposure provides a good level of diversification, reducing the portfolio's vulnerability to country-specific risks.

Growth Info

Historically, the portfolio has shown a solid performance with a CAGR of 14.53%. This indicates a strong growth trajectory over the long term. However, it is important to note the maximum drawdown of -35.7%, which reflects significant volatility. This means that while the portfolio has performed well historically, it has also experienced substantial fluctuations. Investors should be prepared for potential downturns, but the high CAGR suggests that the portfolio has the potential to recover and grow over time.

Projection Info

The forward projection using a Monte Carlo simulation, which ran 1,000 simulations, indicates a promising future for the portfolio. Assuming a hypothetical initial investment, the 50th percentile shows a growth of 473.84%, while the 67th percentile projects an impressive 803.58% increase. With 975 simulations showing positive returns, the portfolio appears to have a strong probability of success. The average annualized return across simulations is 16.54%, suggesting robust potential for future growth, though investors should remain aware of inherent risks.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising 99.41% of the total allocation. This high concentration in equities indicates a growth-oriented strategy, aiming for capital appreciation over time. While this can lead to significant returns, it also introduces higher volatility. A small cash allocation of 0.56% provides minimal liquidity, and other asset classes are negligible. For investors seeking to maintain a growth-focused approach, this allocation is suitable, but those desiring reduced risk might consider diversifying into fixed-income assets.

Sectors Info

  • Technology
    23%
  • Financials
    17%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio is well-diversified across various sectors, with the largest allocations in Technology (22.99%), Financial Services (17.15%), and Industrials (11.76%). This sectoral diversification helps mitigate risks associated with any single industry. However, the concentration in Technology may increase volatility, given the sector's inherent fluctuations. To maintain a balanced approach, investors should monitor sector performances and consider rebalancing if one sector becomes overly dominant, ensuring the portfolio remains aligned with long-term growth objectives.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, comprising 71.83% of the allocation. This is complemented by exposures to Europe Developed (11.82%), Asia Emerging (4.98%), and other regions. This geographic diversification provides a buffer against localized economic downturns. However, the heavy North American focus could limit exposure to growth opportunities in emerging markets. To enhance geographic diversification, investors might explore increasing allocations to underrepresented regions, balancing the portfolio's growth potential with risk mitigation.

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 is already well-optimized for growth, given its broad diversification and focus on equities. Investors looking to adjust their risk profile can move along the efficient frontier by altering the equity-to-fixed income ratio. To pursue a riskier portfolio, increase equity exposure; for a more conservative approach, incorporate more bonds or fixed-income assets. However, before making changes, focus on maintaining diversification and aligning with personal risk tolerance and financial goals, ensuring that any adjustments support long-term objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.83%

The portfolio offers a moderate dividend yield of 1.83%, with contributions from the Avantis® U.S. Small Cap Value ETF at 1.5%, Vanguard Total Stock Market Index Fund ETF Shares at 1.3%, and Vanguard Total International Stock Index Fund ETF Shares at 3.0%. This yield provides a steady income stream, which can be reinvested for compounding growth. Investors seeking higher income might consider increasing allocations to higher-yielding assets, but should balance this with the portfolio's overall growth objectives to ensure alignment with long-term goals.

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) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, reflecting low management costs. This cost efficiency is beneficial for long-term growth, as lower fees can significantly enhance returns over time. The Avantis® U.S. Small Cap Value ETF has a slightly higher cost at 0.25%, but the Vanguard funds maintain very low fees, contributing to the portfolio's overall cost-effectiveness. Investors should continue to monitor expense ratios, ensuring that costs remain competitive and aligned with the portfolio's performance and investment objectives.

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