A balanced and broadly diversified portfolio with a strong focus on developed market equities

Report created on Dec 6, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is evenly split among four ETFs, each holding 25%. It primarily focuses on equities, with negligible allocations in cash, bonds, and other asset classes. This structure indicates a significant emphasis on stock market exposure, which is typical for growth-oriented portfolios. The balanced distribution across different types of ETFs helps in spreading risk, though the heavy reliance on equities suggests a need for careful risk management. Consider adding more diverse asset classes like bonds or real estate to cushion against stock market volatility and enhance stability.

Growth Info

The portfolio has shown a compound annual growth rate (CAGR) of 8.91% with a maximum drawdown of -22.9%. This indicates strong growth potential but also highlights vulnerability during market downturns. Understanding past performance helps in setting realistic expectations, though it's important to remember that historical returns are not guarantees of future success. To mitigate risks during downturns, consider incorporating defensive assets or strategies to reduce the impact of potential losses.

Projection Info

Monte Carlo simulations, using historical data, project a wide range of potential outcomes for this portfolio. With a median scenario showing an 181.8% increase, the projections indicate a favorable outlook. However, the 5th percentile scenario suggests a potential loss of -15.87%. While simulations provide insights, they are not foolproof predictions. To prepare for various market conditions, consider regularly reviewing and adjusting the portfolio to align with evolving financial goals and risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted toward stocks, with over 99% allocation, which limits diversification benefits. This concentration in equities can lead to significant volatility, especially during market downturns. While stocks offer growth potential, balancing with other asset classes like bonds or real estate can provide more stability and reduce overall risk. Explore opportunities to diversify across different asset classes to create a more resilient portfolio in varying market environments.

Sectors Info

  • Financials
    23%
  • Industrials
    17%
  • Consumer Discretionary
    14%
  • Energy
    10%
  • Technology
    9%
  • Basic Materials
    8%
  • Health Care
    6%
  • Consumer Staples
    5%
  • Telecommunications
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio covers a wide range of sectors, with Financial Services, Industrials, and Consumer Cyclicals making up the largest portions. A sectoral spread like this can help mitigate risks specific to any single industry. However, the portfolio's concentration in these sectors could lead to vulnerabilities if they underperform. To enhance resilience, consider diversifying further into underrepresented sectors like Utilities or Healthcare, which often perform differently in various economic cycles.

Regions Info

  • North America
    54%
  • Europe Developed
    23%
  • Japan
    14%
  • Asia Developed
    3%
  • Australasia
    3%
  • Africa/Middle East
    1%

With over half of the portfolio invested in North America and significant exposure to Europe and Japan, this portfolio is well-diversified geographically. Such diversification can help mitigate region-specific risks and capture growth opportunities worldwide. However, the limited exposure to emerging markets may restrict potential growth from rapidly developing economies. Consider increasing allocation to emerging markets to benefit from their growth potential while balancing the associated risks.

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 current asset mix can be optimized using the Efficient Frontier concept to achieve the best possible risk-return ratio. By adjusting the allocation among existing ETFs, it's possible to enhance portfolio efficiency without altering the core holdings. This optimization focuses on maximizing returns for a given level of risk, rather than increasing diversification. Regularly assess the portfolio's positioning on the Efficient Frontier to ensure it remains aligned with financial goals and risk appetite.

Dividends Info

  • Avantis® U.S. Equity ETF 1.20%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Dimensional International Value ETF 3.70%
  • Schwab Fundamental International Small Company Index ETF 0.70%
  • Weighted yield (per year) 1.78%

The portfolio has a total dividend yield of 1.78%, with the Dimensional International Value ETF contributing the highest yield. Dividend income can provide a steady cash flow, which is beneficial in volatile markets. While dividends are a valuable component of total returns, they should not be the sole focus. Consider balancing dividend-paying assets with growth-oriented investments to achieve a comprehensive strategy that aligns with both income needs and long-term growth objectives.

Ongoing product costs Info

  • Avantis® U.S. Equity ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Dimensional International Value ETF 0.27%
  • Schwab Fundamental International Small Company Index ETF 0.39%
  • Weighted costs total (per year) 0.26%

The portfolio's total expense ratio (TER) stands at 0.26%, which is relatively low, indicating cost efficiency. Lower costs can significantly enhance long-term returns by reducing the drag on performance. However, always be vigilant about fees and explore opportunities to minimize them further. Consider regular reviews of fund expenses and explore alternative investment options that offer similar exposure at a lower cost to maximize net returns.

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