A growth-focused portfolio with strong diversification and moderate risk exposure

Report created on Jan 20, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is primarily composed of ETFs, with a significant 70% allocation to the Vanguard FTSE Developed Markets Index Fund. This is complemented by 15% in the Avantis U.S. Small Cap Value ETF and another 15% in the Vanguard FTSE Emerging Markets Index Fund. This composition suggests a diversified approach with a heavy emphasis on developed markets. While the allocation aligns with growth objectives, it may lack exposure to other asset classes like bonds or commodities, which could offer additional diversification benefits.

Growth Info

Historically, the portfolio has delivered a solid Compound Annual Growth Rate (CAGR) of 9.54%, indicating robust performance over time. The maximum drawdown of -36.91% highlights potential volatility, a common trait in growth-focused portfolios. This performance is noteworthy, yet it’s important to remember that past performance is not indicative of future results. To mitigate potential downturns, consider incorporating assets that may perform well during market stress, such as defensive sectors or fixed-income securities.

Projection Info

Monte Carlo simulations offer a glimpse into potential future outcomes by using historical data to project various scenarios. With 1,000 simulations, the portfolio shows a median (50th percentile) growth of 247.9%, suggesting a strong potential for future gains. However, the 5th percentile indicates a possible downside of -30.9%. It's crucial to understand that these projections are based on historical trends and do not guarantee future performance. Regularly reviewing and adjusting the portfolio based on changing market conditions can help align it with personal risk tolerance and goals.

Asset classes Info

  • Stocks
    98%
  • Cash
    2%

The portfolio's asset allocation is heavily skewed towards stocks, with a 98% allocation, and a minimal 2% in cash. This stock-heavy allocation aligns with a growth strategy but increases exposure to market volatility. Compared to typical balanced portfolios, this composition lacks fixed income, which could provide stability during market downturns. Consider diversifying into other asset classes to reduce risk, such as adding bonds or alternative investments, which can offer counterbalance during stock market fluctuations.

Sectors Info

  • Financials
    23%
  • Industrials
    16%
  • Technology
    12%
  • Consumer Discretionary
    11%
  • Health Care
    8%
  • Basic Materials
    7%
  • Energy
    6%
  • Consumer Staples
    6%
  • Telecommunications
    5%
  • Real Estate
    3%
  • Utilities
    3%

The portfolio is diversified across various sectors, with notable allocations in Financial Services (23%), Industrials (16%), and Technology (12%). This diverse sectoral exposure is beneficial for spreading risk. However, the concentration in Financial Services could lead to increased volatility, especially during economic downturns. Balancing sector weights to ensure no single sector dominates can help mitigate sector-specific risks. Regularly reviewing sector performance and adjusting allocations can optimize the portfolio's risk-return profile.

Regions Info

  • Europe Developed
    36%
  • North America
    23%
  • Japan
    15%
  • Asia Emerging
    9%
  • Asia Developed
    8%
  • Australasia
    5%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Europe Emerging
    1%

Geographically, the portfolio is well-diversified, with the largest exposure in Europe Developed (36%) and North America (23%). This distribution provides a broad global reach, although the relatively lower exposure to emerging markets may limit growth potential. Emerging markets often offer higher growth opportunities but come with increased risk. To enhance geographic diversification, consider gradually increasing exposure to regions with strong growth prospects, while keeping an eye on geopolitical and economic risks.

Market capitalization Info

  • Mega-cap
    37%
  • Large-cap
    27%
  • Mid-cap
    15%
  • Small-cap
    11%
  • Micro-cap
    7%

The portfolio's market capitalization distribution includes Mega (37%), Big (27%), Medium (15%), Small (11%), and Micro (7%) caps. This mix offers a balance between stability and growth potential, with larger caps providing stability and smaller caps offering higher growth prospects. This distribution aligns well with growth objectives, though the higher allocation to mega caps may limit potential upside. Consider slightly increasing exposure to mid and small caps to enhance growth potential, while being mindful of the associated 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 could potentially benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio for a given set of assets. This involves rebalancing current allocations to achieve a more optimal mix without necessarily increasing diversification. While the current portfolio is well-structured, exploring slight adjustments in asset weights could enhance returns without significantly increasing risk. Regular rebalancing based on market conditions and investment goals can help maintain the portfolio's efficiency.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 1.98%

The portfolio's overall dividend yield stands at 1.98%, with the Vanguard FTSE Emerging Markets Index Fund contributing the highest yield at 3.20%. Dividends can provide a steady income stream, which is a valuable component of total returns, especially in volatile markets. While the current yield aligns with growth objectives, exploring higher-yielding assets could enhance income potential. However, it's important to balance yield with growth prospects to avoid sacrificing capital appreciation for income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is impressively low at 0.08%, which is beneficial for long-term performance as lower costs mean more of the returns are retained. The Avantis U.S. Small Cap Value ETF has the highest expense ratio at 0.25%, which is still reasonable. Keeping costs low is a crucial aspect of investment success. Regularly reviewing the portfolio's expense ratios and seeking cost-effective alternatives can help maximize net returns without significantly altering the risk profile.

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