High Growth Broadly Diversified Portfolio with Robust International Exposure and Low Costs

Report created on Aug 11, 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 consists of three ETFs: Vanguard Total Stock Market Index Fund ETF Shares, Vanguard Total International Stock Index Fund ETF Shares, and Avantis® U.S. Small Cap Value ETF. The allocation is heavily weighted towards the Vanguard Total Stock Market Index Fund, making up 60% of the portfolio, providing broad exposure to the U.S. market. The international ETF makes up 25% and offers global diversification, while the small-cap value ETF at 15% adds a focus on potentially undervalued U.S. small-cap stocks. This composition suggests a growth-oriented strategy with a strong emphasis on diversification.

Growth Info

Historically, the portfolio has performed well with a compound annual growth rate (CAGR) of 15.15%, which indicates strong growth potential. However, it has also experienced a maximum drawdown of -36.24%, highlighting the inherent risk in a growth-focused portfolio. The days that make up 90% of returns are only 15, suggesting that most of the gains are concentrated in a few days. This performance pattern is typical for growth portfolios and indicates the need for a long-term investment horizon to ride out periods of volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected based on historical data. This method uses random sampling to predict future outcomes and provides a range of possible returns. The results show a 5th percentile return of 29.44% and a median return of 435.18%, indicating a wide range of potential outcomes. The annualized return across all simulations is 15.81%, suggesting continued strong growth potential. However, the variability in outcomes underscores the importance of maintaining a long-term perspective.

Asset classes Info

  • Stocks
    99%

The portfolio's asset allocation is heavily skewed towards stocks, making up 99.48% of the total. This high concentration in equities aligns with the growth profile of the portfolio, offering the potential for significant capital appreciation. The minimal allocation to cash and other asset classes suggests a high-risk tolerance, suitable for investors seeking long-term growth. While this allocation can lead to higher returns, it also exposes the portfolio to increased volatility, emphasizing the need for a long-term investment horizon.

Sectors Info

  • Technology
    23%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    6%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is diversified across multiple sectors, with technology being the largest at 22.66%. Financial services and industrials also have significant allocations. This sector diversification helps mitigate risk by spreading exposure across various economic segments. However, the concentration in technology could lead to increased volatility if the sector experiences downturns. Balancing sector allocations can help manage risk, but the current setup seems well-positioned for growth, given the dynamic nature of these sectors.

Regions Info

  • North America
    76%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio has a strong focus on North America, which accounts for 76.34% of the allocation. This is complemented by exposure to developed Europe and emerging Asia. While the dominance of North American assets aligns with the growth strategy, the international allocation provides a hedge against regional downturns. This geographic diversification is beneficial for capturing growth in different markets, but the heavy North American focus could expose the portfolio to regional economic risks.

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 that there is room to adjust the risk-return profile by moving along the efficient frontier. For those seeking a riskier portfolio, increasing exposure to high-growth sectors or small-cap stocks may be beneficial. Conversely, for a more conservative approach, incorporating more fixed-income assets could help reduce volatility. However, given the current composition, focusing on maintaining the low-cost structure and broad diversification should remain priorities before making significant changes.

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) 1.76%

The portfolio's dividend yield stands at 1.76%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 3.0%. This yield provides a modest income stream, which can be reinvested to enhance returns over time. While not the primary focus of a growth portfolio, dividends can offer some stability during market volatility. Maintaining a balance between growth and income can be beneficial, but the current yield aligns with the growth-oriented nature of the portfolio.

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) 0.08%

The total expense ratio (TER) of the portfolio is 0.08%, which is impressively low and supports the overall growth strategy by minimizing costs. The Vanguard ETFs have particularly low costs, with the Total Stock Market Index Fund ETF at 0.03%. Keeping investment costs low is crucial for maximizing net returns over the long term. This cost structure enhances the portfolio's efficiency and supports the pursuit of higher returns by preserving more of the investment gains.

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