A growth-focused portfolio with limited diversification and strong U.S. market exposure

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 suits an investor with a high risk tolerance, focused on growth and willing to accept volatility for potential high returns. The heavy concentration in U.S. equities and lack of geographic diversification align with a long-term investment horizon, aiming for capital appreciation. Such an investor is likely comfortable with market fluctuations and seeks to capitalize on the growth potential of large and small-cap U.S. stocks. This portfolio is ideal for individuals looking to build wealth over time, while accepting the risks associated with a concentrated, growth-oriented approach.

Positions

  • Vanguard S&P 500 ETF
    VOO - US9229083632
    70.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    15.00%
  • Invesco S&P MidCap Quality ETF
    XMHQ - US46137V4721
    15.00%

The portfolio is heavily weighted towards U.S. equities, with 70% in the Vanguard S&P 500 ETF, 15% in the Avantis U.S. Small Cap Value ETF, and 15% in the Invesco S&P MidCap Quality ETF. This composition leans towards large-cap stocks, with some exposure to mid and small-cap equities. Compared to a more diversified benchmark, the portfolio is concentrated in fewer asset classes and geographic regions. This focus on U.S. equities can benefit from the stability and growth of the U.S. market but may lack diversification benefits that could reduce risk and enhance returns over the long term.

Growth Info

Historically, the portfolio has demonstrated strong performance, with a Compound Annual Growth Rate (CAGR) of 17.57%. This indicates robust growth over time, outperforming many typical benchmarks. However, the maximum drawdown of -36.15% highlights potential volatility during market downturns. This suggests that while the portfolio can generate high returns, it may also experience significant declines in value. To mitigate this, consider diversifying into different asset classes or regions to smooth out returns and reduce the impact of market volatility on the overall portfolio performance.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, shows promising potential for this portfolio. With an annualized return of 20.28% across 1,000 simulations, the median outcome suggests a significant growth in value. However, past performance is not a guarantee of future results, and projections are inherently uncertain. The simulations indicate that diversification could help manage risks, as the majority of positive outcomes are tied to the current asset allocation. Consider rebalancing periodically to maintain alignment with your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%
  • Cash
    0%

The portfolio is entirely invested in stocks, offering no exposure to other asset classes such as bonds or real estate. This 100% equity allocation can lead to higher returns during bull markets but also increases risk during downturns. Compared to a more diversified benchmark, this lack of asset class diversification may expose the portfolio to greater volatility. Including different asset classes could provide more stability and potential income, helping to balance risk and return. Consider adding fixed-income securities or other asset classes to diversify and mitigate risks.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Industrials
    13%
  • Consumer Discretionary
    13%
  • Health Care
    9%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is heavily concentrated in technology (26%), followed by financial services (15%) and industrials (13%). This composition aligns closely with common benchmarks, providing exposure to key growth sectors. However, this concentration can lead to increased volatility, especially if specific sectors underperform. For instance, tech-heavy portfolios may experience higher volatility during interest rate hikes. To enhance diversification, consider adding sectors that are underrepresented, such as utilities or real estate, which may offer more stable returns during economic fluctuations.

Regions Info

  • North America
    99%
  • Europe Developed
    1%
  • Latin America
    0%
  • Asia Emerging
    0%
  • Asia Developed
    0%
  • Africa/Middle East
    0%

The portfolio's geographic allocation is overwhelmingly concentrated in North America (99%), with minimal exposure to other regions. This heavy U.S. focus can benefit from the stability of the U.S. market but lacks the diversification benefits of international exposure. Compared to global benchmarks, the portfolio is underexposed to regions such as Europe and Asia, which can offer growth opportunities and reduce regional risk. Consider diversifying geographically to capture potential growth in emerging markets and mitigate risks associated with regional economic downturns.

Market capitalization Info

  • Mega-cap
    33%
  • Large-cap
    24%
  • Mid-cap
    20%
  • Small-cap
    16%
  • Micro-cap
    7%

The portfolio's market capitalization distribution is fairly balanced, with 33% in mega-cap, 24% in big-cap, 20% in medium-cap, 16% in small-cap, and 7% in micro-cap stocks. This spread provides exposure across different company sizes, which can contribute to diversification and potential growth. However, the concentration in large-cap stocks may limit the potential for outsized gains typically associated with smaller companies. To enhance growth potential, consider increasing exposure to small and micro-cap stocks, while maintaining a balance that aligns with your risk tolerance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard S&P 500 ETF 1.20%
  • Invesco S&P MidCap Quality ETF 4.90%
  • Weighted yield (per year) 1.82%

The portfolio's dividend yield is moderate at 1.82%, with the Invesco S&P MidCap Quality ETF contributing the highest yield of 4.90%. Dividends can provide a steady income stream and contribute to total returns, which is beneficial for growth-focused investors seeking income. However, the overall yield is relatively low, reflecting the growth-oriented nature of the portfolio. To enhance income, consider adding higher-yielding assets or dividend-focused funds, which can offer both income and potential growth, aligning with long-term investment goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Quality ETF 0.25%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is impressively low at 0.10%, with the Vanguard S&P 500 ETF having the lowest cost of 0.03%. Low costs are crucial for long-term investment success, as they directly impact net returns. This cost efficiency supports better performance over time by minimizing the drag on returns. Maintaining this low-cost structure is beneficial, but it's important to periodically review fees to ensure they remain competitive. Consider exploring other low-cost investment options to further optimize cost efficiency and enhance returns.

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.

The portfolio appears to be positioned for growth, but there may be opportunities to optimize its risk-return profile using the Efficient Frontier. This concept involves adjusting asset allocations to achieve the best possible balance of risk and return. While the current allocation is growth-focused, exploring different allocations within the existing asset classes may enhance efficiency. Regularly reviewing and rebalancing the portfolio can help maintain alignment with your risk tolerance and investment objectives, ensuring that you achieve an optimal balance over time.

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