A growth-oriented US-focused portfolio with high equity exposure and moderate geographic diversification
Report created on Dec 14, 2024Risk profile
5/7
Diversification profile
4/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 61.36% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 19.41% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 19.22%
The portfolio is heavily weighted towards equity ETFs, with 61.36% in the Vanguard S&P 500 ETF, 19.41% in Avantis U.S. Small Cap Value ETF, and 19.22% in Vanguard Total International Stock Index Fund. This composition reflects a strong focus on growth through equities, with minimal allocation to other asset classes like cash and bonds. Such a structure can offer substantial returns but also comes with increased risk, especially in volatile markets. Diversifying into other asset classes could potentially reduce risk and provide more stability, especially during market downturns.
Growth
Historically, the portfolio has demonstrated a robust compound annual growth rate (CAGR) of 16.03%, indicating strong past performance. However, it also experienced a significant maximum drawdown of -36.18%, highlighting its vulnerability during market downturns. While past performance can provide insights, it doesn't guarantee future results due to changing market conditions. Investors should be prepared for potential volatility and consider strategies to mitigate risk, such as diversifying into less correlated assets or employing hedging techniques.
Projection
The Monte Carlo simulation, which uses historical data to project future outcomes, shows a wide range of potential returns. With 1,000 simulations, the 5th percentile predicts a 19.49% return, while the 67th percentile suggests an 806.22% return. This illustrates the uncertainty and variability in potential outcomes. While simulations can provide a probabilistic view of future performance, they rely on historical data and assumptions that may not hold true. Investors should use these projections as one of several tools in decision-making and remain flexible to adapt to changing market conditions.
Asset classes
- Stocks 100%
The portfolio is predominantly invested in stocks, comprising 99.64% of the total allocation. This heavy reliance on equities suggests a high growth potential but also exposes the portfolio to significant market risk. The minimal allocation to cash and other assets limits its ability to cushion against market volatility. Considering a more balanced allocation across different asset classes, such as bonds or alternative investments, could enhance diversification and potentially improve the risk-return profile of the portfolio.
Sectors
- 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%
The sector allocation shows a strong emphasis on technology (23.99%), financial services (17.54%), and consumer cyclicals (11.43%). While this diversification across sectors can capture growth in various economic segments, it also implies a concentration risk if these sectors underperform. Balancing the portfolio with exposure to more defensive sectors like healthcare or utilities could provide stability during economic downturns. Investors should monitor sector trends and adjust allocations to maintain a balanced approach that aligns with their risk tolerance and market outlook.
Regions
- 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 heavily concentrated in North America, accounting for 81.49% of the allocation. This focus on the US market can capitalize on its growth potential but also increases exposure to region-specific risks. The limited exposure to emerging markets and other regions suggests an opportunity for further diversification. Expanding geographic allocation to include more international markets could enhance diversification, reduce regional risk, and potentially capture growth opportunities in underrepresented areas.
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 seeks to maximize returns for a given level of risk. By adjusting the allocation between the existing assets, investors might achieve a more favorable risk-return ratio. This doesn't necessarily mean adding new assets but rather reallocating current holdings to achieve better efficiency. It's important to note that optimization based solely on historical data might not account for future market changes, so regular reviews and adjustments are advisable.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.50%
- Vanguard S&P 500 ETF 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 3.00%
- Weighted yield (per year) 1.60%
The portfolio's dividend yield stands at 1.6%, with the Vanguard Total International Stock Index Fund contributing the highest yield at 3.0%. While dividends provide a steady income stream, the overall yield is relatively modest compared to other income-focused investments. Investors seeking higher income might consider increasing exposure to dividend-paying stocks or funds. However, balancing the pursuit of yield with growth objectives is crucial to maintaining the portfolio's overall strategy and risk profile.
Ongoing product costs
- 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%
The portfolio's total expense ratio (TER) is 0.08%, which is relatively low and beneficial for long-term returns. Lower costs mean more of the portfolio's returns are retained, enhancing compounding over time. However, the Avantis U.S. Small Cap Value ETF has a higher expense ratio of 0.25%. Investors should regularly review the cost structure and consider lower-cost alternatives if they align with their investment strategy. Keeping expenses in check is a simple but effective way to improve net returns over the long haul.
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