Growth-Oriented Portfolio with Strong Diversification and Moderate Risk for Long-Term Investors

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 is suitable for growth-oriented investors with a moderate to high risk tolerance, seeking long-term capital appreciation. Such investors are typically comfortable with market volatility and have a longer investment horizon, allowing them to ride out market fluctuations. The broad diversification across sectors and geographies suits those who appreciate a balanced approach, while the high stock allocation aligns with individuals aiming for potentially higher returns. This portfolio is ideal for investors focused on wealth accumulation, rather than immediate income generation, and who prioritize growth over stability.

Positions

  • Vanguard Total Stock Market Index Fund ETF Shares
    VTI - US9229087690
    40.00%
  • Avantis® U.S. Small Cap Value ETF
    AVUV - US0250728773
    20.00%
  • Vanguard Total International Stock Index Fund ETF Shares
    VXUS - US9219097683
    20.00%
  • Avantis® International Small Cap Value ETF
    AVDV - US0250728021
    10.00%
  • Schwab U.S. Dividend Equity ETF
    SCHD - US8085247976
    10.00%

The portfolio is composed of five ETFs, with a notable 40% allocation to the Vanguard Total Stock Market Index Fund ETF Shares. This composition reflects a strong focus on U.S. stocks, balanced with international exposure through the Vanguard Total International Stock Index Fund and Avantis International Small Cap Value ETF. The inclusion of Schwab U.S. Dividend Equity ETF adds a dividend-focused element, which can provide a steady income stream. This mix indicates a growth-oriented strategy with a diversified approach, suitable for long-term wealth accumulation. To maintain this balance, regularly review the allocation to ensure it aligns with your financial goals and risk tolerance.

Growth Info

Historically, the portfolio has delivered a commendable compound annual growth rate (CAGR) of 14.92%, with a maximum drawdown of -37.65%. This performance suggests a robust growth trajectory, albeit with significant volatility, characteristic of equity-heavy portfolios. The days that make up 90% of returns being just 15 indicates a concentrated period of significant gains, a common trait in high-growth portfolios. To capitalize on this performance, consider maintaining a long-term investment horizon to weather short-term market fluctuations and to benefit from compounding returns over time.

Projection Info

A Monte Carlo simulation was conducted, using a hypothetical initial investment, to project future portfolio performance. With 1,000 simulations, the annualized return averaged 14.88%, showing a promising growth outlook. The 5th percentile projection at 33.43% and the 67th percentile at 668.24% highlight the range of potential outcomes, underscoring the inherent uncertainty in market investments. This analysis suggests a high likelihood of positive returns, but also emphasizes the importance of risk management. Continuously assess your risk tolerance and adjust your portfolio as needed to align with your long-term financial objectives.

Asset classes

  • Stocks
    99%
  • Cash
    1%
  • Other
    0%
  • Bonds
    0%
  • No data
    0%

The portfolio is heavily weighted in stocks, comprising 99.46% of the total allocation, with minimal exposure to other asset classes like cash, bonds, and others. This stock-centric approach aligns with a growth-focused investment strategy, aiming for higher returns at the cost of increased volatility. While this can be beneficial in a bull market, it also exposes the portfolio to significant risks during market downturns. To mitigate potential risks, consider diversifying into other asset classes, such as bonds or alternative investments, to enhance stability and reduce overall portfolio volatility.

Sectors

  • Financials
    19%
  • Technology
    18%
  • Industrials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Energy
    8%
  • Consumer Staples
    6%
  • Basic Materials
    6%
  • Telecommunications
    5%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation within the portfolio is diverse, with significant exposure to Financial Services (19.02%), Technology (17.62%), and Industrials (13.75%). This broad sector distribution helps mitigate risks associated with any single industry's downturn. However, the heavy concentration in certain sectors could lead to heightened volatility. To further optimize sector allocation, periodically review the portfolio's sector balance and adjust as necessary to ensure it remains aligned with your investment strategy and risk profile. This proactive approach can enhance the portfolio's resilience to sector-specific economic shifts.

Regions

  • North America
    72%
  • Europe Developed
    12%
  • Japan
    6%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Europe Emerging
    0%

The geographic composition is predominantly North American, with 72.03% invested in this region, followed by Europe Developed at 12.07% and Japan at 6.25%. This distribution reflects a strong home-country bias, which can be advantageous due to familiarity with local markets. However, it also limits exposure to potentially high-growth regions. To achieve a more balanced global diversification, consider increasing allocations to emerging markets and other developed regions. This strategy can provide exposure to diverse economic cycles and growth opportunities, enhancing the portfolio's overall performance potential.

Redundant positions

  • Vanguard Total International Stock Index Fund ETF Shares
    Avantis® International Small Cap Value ETF
    High correlation

The portfolio exhibits high correlation between the Vanguard Total International Stock Index Fund ETF Shares and Avantis International Small Cap Value ETF. This correlation suggests overlapping investments that may not provide the intended diversification benefits. While diversification reduces risk, excessive overlap can limit potential gains. To optimize the portfolio, consider reducing exposure to highly correlated assets and reallocating to investments with lower correlation. This approach can enhance diversification, reduce risk, and improve overall portfolio efficiency, aligning with your long-term investment goals.

Dividends

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 2.07%

The portfolio's dividend yield stands at 2.07%, with contributions from the Schwab U.S. Dividend Equity ETF (3.4%) and other ETFs. This yield provides a modest income stream, complementing the growth-oriented strategy. Dividends can be a valuable source of passive income, especially during market downturns. To maximize dividend income, consider reinvesting dividends to benefit from compounding effects or reallocating to higher-yielding investments if income generation becomes a priority. Regularly review dividend policies and yields to ensure they align with your financial needs and investment objectives.

Ongoing product costs

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • 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) 0.12%

The portfolio's total expense ratio (TER) is 0.12%, reflecting a cost-effective investment strategy. Low costs are crucial in maximizing net returns, as they reduce the drag on overall performance. The TER is primarily driven by the Avantis International Small Cap Value ETF at 0.36%, while other ETFs offer lower expense ratios. To maintain cost efficiency, continue monitoring expense ratios and consider reallocating to lower-cost alternatives if the TER increases significantly. This approach helps ensure that investment costs remain manageable, allowing more of your returns to contribute to wealth growth.

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.

Before optimizing the portfolio, focus on reducing overlap by addressing highly correlated assets that don't enhance diversification. Once resolved, consider the efficient frontier to adjust risk levels. Moving right on the frontier increases risk and potential returns, while shifting left offers a more conservative approach. This strategic adjustment can align the portfolio with your risk appetite and financial goals. Optimization should be a continuous process, adapting to changing market conditions and personal circumstances, ensuring that the portfolio remains efficient and aligned with your long-term investment strategy.

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