Growth-oriented portfolio with strong U.S. focus and moderate international diversification

Report created on Nov 13, 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 is heavily weighted towards equities, with a significant 60% allocation to the Vanguard S&P 500 ETF. This indicates a strong focus on large-cap U.S. stocks. Additionally, 20% is allocated to the Avantis U.S. Small Cap Value ETF, providing exposure to smaller, potentially high-growth companies. The remaining 20% is invested in the Vanguard Total International Stock Index Fund ETF, offering a level of global diversification. This composition suggests a growth-oriented strategy, aiming to capitalize on the performance of U.S. equities while maintaining some international exposure. For further diversification, consider increasing the allocation to international markets or other asset classes like bonds.

Growth Info

Historically, the portfolio has delivered a robust compound annual growth rate (CAGR) of 16.04%. This impressive performance reflects strong market conditions, particularly within the U.S. equity sector. However, it's important to note the maximum drawdown of -36.31%, which indicates significant volatility during downturns. This kind of performance suggests that while the portfolio has the potential for high returns, it also carries substantial risk. Investors should be prepared for periods of large fluctuations in value, and may want to consider strategies to mitigate this risk, such as diversifying into less volatile assets.

Projection Info

Using Monte Carlo simulation, which runs numerous hypothetical future scenarios based on historical data, the portfolio's potential outcomes were projected. The analysis shows a 50th percentile return of 487.84% and a 67th percentile return of 770.94%, indicating strong potential for growth. However, the 5th percentile return of 32.22% highlights the possibility of underperformance. While these projections offer insight into potential future returns, they are based on past performance and assumptions that may not hold true. Investors should use these as a guide but remain aware of the inherent uncertainties and consider diversifying to manage risk.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly concentrated in equities, with nearly 100% allocated to stocks. This concentration suggests a high-risk, high-reward strategy, as equities tend to offer greater growth potential compared to other asset classes like bonds or cash. However, this also means the portfolio is exposed to the full brunt of stock market volatility. To balance risk and return, consider diversifying into other asset classes such as fixed income or real estate, which can provide stability and income during periods of market turbulence.

Sectors Info

  • 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 portfolio is well-diversified across various sectors, with technology, financial services, and consumer cyclicals being the largest allocations. This sectoral diversity helps mitigate risk as different sectors can perform differently under varying economic conditions. However, the substantial 23.68% allocation to technology suggests a reliance on this sector's continued growth. While tech has historically been a strong performer, it's important to monitor for potential overexposure. A periodic review of sector allocations can ensure balance and adapt to changing market trends.

Regions Info

  • 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 predominantly invested in North America, with 80.77% exposure, primarily through U.S. equities. This strong regional focus aligns with the portfolio's growth orientation but may limit benefits from global diversification. While the remaining 19.23% is spread across other regions, including Europe and Asia, increasing exposure to emerging markets could enhance diversification. These markets often offer higher growth potential but come with increased risk. Balancing geographic allocation can help manage regional economic risks and capitalize on global opportunities.

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's current asset allocation may not be on the Efficient Frontier, which represents the best risk-return trade-off. By adjusting the weights of existing assets, it might be possible to achieve a more optimal balance. This doesn't necessarily mean adding new assets, but rather rebalancing the current ones to improve efficiency. Utilizing tools like Modern Portfolio Theory can help identify an allocation that maximizes returns for a given level of risk. Periodic rebalancing is recommended to maintain this optimal allocation as market conditions change.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.60%

The portfolio's dividend yield is relatively modest at 1.6%, with contributions from each ETF. Dividends can provide a steady income stream, which is especially valuable during periods of market volatility. The Vanguard Total International Stock Index Fund ETF offers the highest yield at 2.9%, enhancing the income component. If generating income is a priority, consider increasing exposure to higher-yielding assets or dividend-focused funds. Balancing growth and income can help achieve a more stable return profile, particularly for investors nearing retirement.

Ongoing product costs Info

  • 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%, reflecting low costs, which is advantageous for long-term returns. Lower costs mean more of the portfolio's returns are retained by the investor. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, is particularly cost-effective. While the Avantis U.S. Small Cap Value ETF has a higher expense ratio of 0.25%, it provides valuable diversification into small-cap stocks. Regularly reviewing and managing costs can significantly impact long-term performance, so keep an eye on expense ratios and consider lower-cost alternatives where possible.

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