Growth-Oriented Broadly Diversified Portfolio with Strong Historic Returns and Moderate Risk for Long-Term Investors

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.

What type of investor this portfolio is suitable for

Growth Investors

This portfolio is suitable for growth-oriented investors with a higher risk tolerance and a long-term investment horizon. Such investors are typically focused on capital appreciation rather than income generation. They are comfortable with market volatility and are willing to endure short-term fluctuations for the potential of higher returns over time. Their investment goals often include building wealth for future financial needs, such as retirement or major life events. These investors understand the importance of staying invested through market cycles and are committed to a disciplined investment approach.

Positions

  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    40.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    25.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    25.00%
  • Avantis® International Small Cap Value ETF
    AVDV - US0250728021
    10.00%

The portfolio is composed entirely of ETFs, with a strong focus on equities. The largest allocation is to the Vanguard Total Stock Market Index Fund ETF, making up 40% of the portfolio. This is complemented by a significant portion in Avantis® U.S. Small Cap Value ETF at 25% and Vanguard Total International Stock Index Fund ETF at another 25%. The remaining 10% is allocated to the Avantis® International Small Cap Value ETF. This composition suggests a growth-oriented strategy, with a broad diversification across different market segments and regions.

Growth

Historically, the portfolio has shown impressive performance with a compound annual growth rate of 15.04%. However, it has also experienced significant volatility, evidenced by a maximum drawdown of -38.55%. This indicates the potential for sharp declines during market downturns. Despite the volatility, the portfolio has been able to recover and generate strong returns over time. The concentration of returns in just 15 days further highlights the importance of staying invested to capture these gains. The performance suggests a robust growth potential for long-term investors who can withstand short-term fluctuations.

Projection

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. Assuming a hypothetical initial investment, the results show a wide range of potential outcomes. The 5th percentile projects a modest return of 20.26%, while the 50th percentile suggests a more substantial return of 413.77%, and the 67th percentile forecasts an impressive 670.1%. The annualized return across all simulations is 15.21%, with 968 out of 1,000 simulations yielding positive returns. This suggests a favorable outlook for long-term growth, albeit with inherent uncertainties.

Asset classes

  • Stocks
    99%
  • Cash
    1%
  • Other
    0%
  • Bonds
    0%
  • No data
    0%

The portfolio is heavily weighted towards stocks, with 99.39% of the allocation in equities. This high equity exposure aligns with the growth objective, but it also introduces higher volatility. The minimal allocations to cash, bonds, and other asset classes suggest limited downside protection and income generation. For investors seeking to balance growth with stability, introducing more fixed-income assets could help reduce risk. However, given the current focus on growth, maintaining the equity-heavy allocation may be appropriate for those with a higher risk tolerance and a long-term investment horizon.

Sectors

  • Financials
    20%
  • Technology
    18%
  • Industrials
    14%
  • Consumer Discretionary
    13%
  • Health Care
    8%
  • Energy
    7%
  • Basic Materials
    6%
  • Consumer Staples
    5%
  • Telecommunications
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is diverse, with notable exposure to Financial Services, Technology, and Industrials, which together constitute over 50% of the portfolio. This diversification across sectors helps mitigate the risk of sector-specific downturns. However, the concentration in these sectors also implies a reliance on their continued performance. Investors should be aware of the potential impact of economic cycles on these sectors. Regularly reviewing sector exposures and adjusting allocations as needed can help maintain a balanced risk profile and optimize returns.

Regions

  • North America
    67%
  • Europe Developed
    14%
  • Japan
    7%
  • Asia Emerging
    4%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Europe Emerging
    0%

Geographically, the portfolio has a strong focus on North America, comprising 67.37% of the allocation, followed by Europe Developed and Japan. This geographic diversification provides exposure to different economic regions, reducing the risk associated with any single market. However, the heavy concentration in North America may limit the benefits of international diversification. Investors looking to further diversify geographically might consider increasing exposure to emerging markets or other developed regions. This approach can enhance the portfolio's resilience to regional economic fluctuations and capture growth opportunities globally.

Dividends

  • Avantis® International Small Cap Value ETF 3.10%
  • 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 3.00%
  • Weighted yield (per year) 1.92%

The portfolio's overall dividend yield stands at 1.92%, with the highest yields coming from the Avantis® International Small Cap Value ETF and Vanguard Total International Stock Index Fund ETF. While dividends contribute to total returns, the portfolio's focus is primarily on capital appreciation. Investors seeking higher income may need to adjust their allocations to include more dividend-focused investments. However, for those prioritizing growth, the current dividend yield can provide a modest income stream while allowing for potential reinvestment to enhance compounding returns over time.

Ongoing product costs

  • Avantis® International Small Cap Value ETF 0.36%
  • 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) 0.13%

With an overall Total Expense Ratio (TER) of 0.13%, the portfolio is cost-efficient, minimizing the drag on returns. The Vanguard ETFs, with their low expense ratios, contribute significantly to this efficiency. Keeping costs low is crucial for maximizing net returns, especially over the long term. While the Avantis ETFs have higher expense ratios, their potential for higher returns may justify the cost. Investors should regularly review the cost structure to ensure it aligns with their investment strategy and consider lower-cost alternatives if they become available without compromising on potential returns.

Risk vs. return

This chart displays the Efficient Frontier, showing the best balance between risk and return for your portfolio based on historical data. It calculates the most efficient asset allocations. If your portfolio is below the curve, it can be optimized for higher returns or lower risk. Portfolios on the curve are the most efficient.

The portfolio optimization chart suggests that the current allocation is well-positioned for growth, but there is room for improvement. Moving along the efficient frontier, investors can achieve a riskier or more conservative portfolio by adjusting their asset mix. To enhance returns while managing risk, consider slightly increasing exposure to less correlated assets or diversifying further across sectors and geographies. However, given the portfolio's strong performance and alignment with growth objectives, investors may benefit more from focusing on maintaining discipline and periodically rebalancing to stay on track with their goals.

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