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

Report created on Feb 24, 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 heavily skewed towards equity with a 99% allocation, emphasizing growth potential. Major holdings include broad market index funds like the Vanguard Total Stock Market Index Fund and the Vanguard 500 Index Fund, which together constitute nearly half of the portfolio. This allocation provides a solid foundation for capturing market-wide gains. However, the minimal bond allocation might limit stability during market downturns. Consider increasing bond exposure for balance, especially if nearing retirement or seeking reduced volatility.

Growth Info

Historically, the portfolio has achieved a commendable Compound Annual Growth Rate (CAGR) of 13.12%, demonstrating strong growth potential. This performance outpaces many benchmarks, showcasing the portfolio's ability to capture market gains. However, it also experienced a maximum drawdown of -33.88%, indicating susceptibility to market volatility. Understanding these dynamics helps set expectations for future performance. It's crucial to remember that past performance doesn't guarantee future results. Regularly reviewing market conditions can help manage expectations and adjust strategies as needed.

Projection Info

The Monte Carlo simulation, using historical data, projects an average annualized return of 11.53%. This method simulates various market scenarios to estimate potential future outcomes. While it provides valuable insights, it's important to note that these projections are based on historical trends and may not account for future market shifts. The portfolio shows a strong likelihood of positive returns in the future, but maintaining flexibility and adaptability is key. Regularly revisiting investment strategies based on changing market conditions can help optimize outcomes.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's asset allocation is predominantly in stocks, with a negligible bond exposure. This focus on equities aligns with a growth strategy but may increase volatility. Diversification across asset classes can mitigate risks, especially during market downturns. Comparing this allocation to benchmarks, the lack of bonds is notable. Introducing bonds or other asset classes could provide stability and enhance risk-adjusted returns. Balancing growth and stability is crucial for long-term success, particularly for investors with varying risk tolerances and investment horizons.

Sectors Info

  • Telecommunications
    23%
  • Technology
    21%
  • Financials
    13%
  • Industrials
    9%
  • Consumer Discretionary
    8%
  • Health Care
    8%
  • Consumer Staples
    4%
  • Real Estate
    4%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    2%
  • Consumer Discretionary
    1%

The portfolio is concentrated in Communication Services and Technology sectors, accounting for 44% of the holdings. This focus may lead to higher volatility, especially during tech market corrections. While these sectors have driven recent gains, diversification across more sectors could enhance stability. The current sector allocation aligns with growth trends but may benefit from a broader exposure to defensive sectors like Utilities and Consumer Defensive. Balancing sector exposure can provide resilience against sector-specific downturns and improve overall portfolio stability.

Regions Info

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

With 76% exposure to North America, the portfolio is heavily weighted towards the U.S. market. While this has been advantageous given recent U.S. market performance, it may limit diversification benefits. The remaining exposure is spread across Europe, Japan, and other regions, offering some international diversification. However, increasing allocation to emerging markets could enhance growth potential and reduce reliance on U.S. market performance. Balancing geographic exposure can provide a buffer against regional economic downturns and capture global growth opportunities.

Market capitalization Info

  • Mega-cap
    50%
  • Large-cap
    25%
  • Mid-cap
    17%
  • Small-cap
    5%
  • Micro-cap
    2%

The portfolio is heavily weighted towards mega and big market capitalization stocks, making up 75% of the allocation. While these companies tend to be more stable and established, they might offer limited growth compared to smaller companies. The small and micro-cap segments, though riskier, can provide significant growth opportunities. Balancing market capitalization exposure can enhance diversification and capture growth potential across different company sizes. Consider increasing exposure to mid and small-cap stocks to diversify risk and tap into emerging growth opportunities.

Redundant positions Info

  • Vanguard FTSE Developed Markets Index Fund ETF Shares
    VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES
    High correlation
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES
    VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES
    High correlation

The portfolio includes several highly correlated assets, such as the Vanguard FTSE Developed Markets Index Fund ETF Shares and the Vanguard Total International Stock Index Fund Admiral Shares. High correlation means these assets tend to move together, reducing diversification benefits. During market downturns, this could amplify losses. Identifying and reducing overlap among correlated assets can enhance diversification and improve risk management. Consider replacing highly correlated funds with those offering distinct market exposures to optimize portfolio resilience and performance.

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 allocation could be optimized using the Efficient Frontier, which identifies the best risk-return ratio. This involves adjusting the mix of existing assets to achieve an optimal balance. However, it's important to note that optimization focuses on the current asset set and may not address broader diversification goals. By refining asset weights, the portfolio can potentially enhance returns without increasing risk. Regularly reviewing and adjusting allocations can ensure the portfolio remains aligned with risk tolerance and financial objectives.

Dividends Info

  • Alphabet Inc Class C 0.30%
  • Vanguard Total Bond Market Index Fund Admiral Shares 3.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.10%
  • VANGUARD EMERGING MARKETS STOCK INDEX FUND INSTITUTIONAL PLUS SHARES 0.70%
  • VANGUARD 500 INDEX FUND INSTITUTIONAL SELECT SHARES 0.90%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 1.20%
  • VANGUARD REIT INDEX FUND INSTITUTIONAL SHARES 2.80%
  • VANGUARD EXTENDED MARKET INDEX FUND INSTITUTIONAL SHARES 0.80%
  • VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 3.10%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 1.20%
  • Weighted yield (per year) 1.42%

The portfolio's overall dividend yield is 1.42%, with contributions from various funds. Dividends can provide a steady income stream and enhance total returns, especially in volatile markets. However, the focus on growth stocks may limit dividend income. For investors seeking income, increasing allocation to higher-yielding assets could be beneficial. Balancing growth and income is essential for meeting investment goals, particularly for those nearing retirement or requiring regular cash flow. Adjusting the dividend strategy can help align with changing financial needs.

Ongoing product costs Info

  • Vanguard Total Bond Market Index Fund Admiral Shares 0.05%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • VANGUARD EMERGING MARKETS STOCK INDEX FUND INSTITUTIONAL PLUS SHARES 0.07%
  • VANGUARD 500 INDEX FUND INSTITUTIONAL SELECT SHARES 0.01%
  • VANGUARD 500 INDEX FUND ADMIRAL SHARES 0.04%
  • VANGUARD REIT INDEX FUND INSTITUTIONAL SHARES 0.11%
  • VANGUARD EXTENDED MARKET INDEX FUND INSTITUTIONAL SHARES 0.05%
  • VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND ADMIRAL SHARES 0.12%
  • VANGUARD TOTAL STOCK MARKET INDEX FUND ADMIRAL SHARES 0.04%
  • Weighted costs total (per year) 0.04%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.04%, supporting long-term performance. Low costs enhance returns by minimizing the drag on performance, allowing more capital to compound over time. This cost efficiency aligns with best investment practices and provides a solid foundation for achieving financial goals. Maintaining low costs should remain a priority, as it directly impacts net returns. Regularly reviewing and optimizing expenses can ensure continued cost-effectiveness and maximize portfolio growth potential.

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