High Growth Portfolio with Broad Diversification Suited for Moderate Risk Tolerance and Long-Term Investment Horizon
Report created on Dec 3, 2024Risk profile
5/7
Diversification profile
4/5
Positions
-
VU Vanguard Growth Index Fund ETF Shares
VUG - US9229087369 70.00% -
VE Vanguard FTSE All-World ex-US Index Fund ETF Shares
VEU - US9220427754 30.00%
The portfolio is primarily composed of two ETFs: Vanguard Growth Index Fund ETF Shares and Vanguard FTSE All-World ex-US Index Fund ETF Shares. The allocation leans heavily towards the Vanguard Growth Index at 70%, with the remaining 30% in the FTSE All-World ex-US Index. This setup suggests a focus on growth-oriented investments, with a notable tilt towards U.S. equities. The broad diversification across these two funds implies exposure to a wide range of sectors and geographic regions, which can help mitigate specific risks while still aiming for significant growth potential.
Growth
Historically, the portfolio has delivered a robust compound annual growth rate (CAGR) of 13.8%, indicating strong performance over the investment period. However, it has also experienced a maximum drawdown of -34.23%, highlighting potential volatility. This performance suggests that while the portfolio has been successful in capturing significant returns, it's also susceptible to market fluctuations. Investors should be prepared for periods of decline, which are typical in growth-focused portfolios. Maintaining a long-term perspective can help weather these downturns and capitalize on the overall growth trajectory.
Projection
Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This statistical method helps estimate the range of possible outcomes by simulating different scenarios. The results show a median (50th percentile) potential growth of 318.8%, with a 5th percentile at 31.73% and a 67th percentile at 476.67%. The high number of simulations with positive returns (975 out of 1,000) suggests a favorable outlook, but investors should remain aware of the inherent uncertainties in any forecast. A diversified strategy can help enhance resilience against unexpected market shifts.
Asset classes
- Stocks 99%
- Cash 1%
The portfolio is heavily skewed towards stocks, comprising over 99% of the total allocation, with minimal cash and other assets. This concentration underscores a high-risk, high-reward approach, suitable for investors seeking capital appreciation. While this focus can drive significant growth, it also increases vulnerability to market downturns. To align with a more balanced risk profile, consider incorporating other asset classes like bonds or real estate to add stability and reduce volatility. Diversifying asset classes can cushion against market shocks and provide smoother returns over time.
Sectors
- Technology 39%
- Consumer Discretionary 13%
- Telecommunications 11%
- Financials 11%
- Health Care 8%
- Industrials 7%
- Consumer Staples 3%
- Basic Materials 3%
- Energy 2%
- Real Estate 2%
- Utilities 1%
The sector allocation is predominantly in technology, making up nearly 39% of the portfolio. Other significant sectors include consumer cyclicals, communication services, and financial services. This concentration in tech suggests a strong growth orientation, capitalizing on innovation and digital transformation trends. However, it also introduces sector-specific risks, such as regulatory changes or technological disruptions. To mitigate these risks, consider a more balanced sector distribution, ensuring that no single sector disproportionately impacts overall performance. This strategy can enhance resilience and provide more consistent returns across different market cycles.
Regions
- North America 72%
- Europe Developed 12%
- Asia Emerging 5%
- Japan 5%
- Asia Developed 3%
- Australasia 2%
- Africa/Middle East 1%
- Latin America 1%
Geographically, the portfolio is heavily weighted towards North America, accounting for over 72% of the allocation. This focus reflects a strong reliance on U.S. markets, which have historically driven significant growth. While this concentration can capitalize on the robust U.S. economy, it also exposes the portfolio to regional risks. To reduce geographic risk, consider increasing exposure to other regions, such as emerging markets or developed economies outside North America. A more geographically diverse portfolio can capture growth opportunities globally and better withstand regional economic fluctuations.
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 composition is well diversified, but there's room for optimization along the efficient frontier. By adjusting the balance between growth and defensive assets, investors can tailor their risk exposure to better align with their risk tolerance. Moving towards a riskier portfolio might involve increasing allocations to high-growth sectors, while a more conservative approach could include adding bonds or other low-volatility assets. Focusing on optimizing the risk-return trade-off can help achieve a more efficient portfolio, maximizing returns for a given level of risk and enhancing overall performance.
Dividends
- Vanguard FTSE All-World ex-US Index Fund ETF Shares 2.90%
- Vanguard Growth Index Fund ETF Shares 0.50%
- Weighted yield (per year) 1.22%
The portfolio’s overall dividend yield stands at 1.22%, with the Vanguard FTSE All-World ex-US Index Fund providing a higher yield of 2.9% compared to 0.5% from the Vanguard Growth Index Fund. This yield reflects a modest income component, which can supplement capital gains. While the primary focus is on growth, dividends can offer a steady income stream, particularly during periods of market volatility. Investors seeking higher income might consider increasing their allocation to dividend-focused assets. Balancing growth and income objectives can enhance total return and provide financial flexibility.
Ongoing product costs
- Vanguard FTSE All-World ex-US Index Fund ETF Shares 0.07%
- Vanguard Growth Index Fund ETF Shares 0.04%
- Weighted costs total (per year) 0.05%
The portfolio benefits from low costs, with a total expense ratio (TER) of 0.05%. This cost efficiency is a significant advantage, as lower fees can lead to higher net returns over time. Keeping investment costs low is crucial, as excessive fees can erode gains, especially in a volatile market. Investors should continue to prioritize cost-effective investment options and regularly review their portfolio to ensure expenses remain competitive. By maintaining a focus on minimizing costs, investors can enhance their overall return potential and achieve their long-term financial goals more effectively.
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