Growth-Oriented Portfolio with Low Diversification and Moderate Risk for Long-Term Investment in U.S. Market

Report created on Dec 4, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily concentrated in U.S. equities, with 70% in the Vanguard S&P 500 ETF, 20% in Avantis U.S. Small Cap Value ETF, and 10% in Invesco S&P MidCap Quality ETF. This composition indicates a strong focus on large-cap and small-cap stocks, with a slight tilt towards quality mid-cap stocks. The portfolio's low diversification score suggests a concentrated approach, which can lead to higher volatility. To enhance diversification, consider adding different asset classes or geographic regions to balance risk and potential returns.

Growth Info

With a historical CAGR of 18.29%, the portfolio has delivered impressive returns. However, it has experienced a significant maximum drawdown of -36.55%, indicating vulnerability during market downturns. The high returns are primarily driven by the strong performance of U.S. equities. This performance highlights the portfolio's growth potential but also its susceptibility to market volatility. To mitigate potential drawdowns, consider incorporating more defensive assets or increasing cash reserves to cushion against future market dips.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes. The 5th percentile projects a modest gain of 107.72%, while the 50th percentile suggests a substantial increase of 865.83%. The 67th percentile indicates an even higher potential return of 1,394.79%. With 993 simulations showing positive returns, the portfolio has a promising outlook. This analysis underscores the importance of maintaining a long-term investment horizon, as short-term fluctuations can be significant.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.92% in equities and a negligible cash position of 0.08%. This allocation reflects a high-risk, high-reward investment strategy typical for growth-oriented portfolios. While stocks offer greater growth potential, they also come with increased volatility. To reduce risk, consider diversifying into fixed-income securities or other asset classes. This approach can provide stability and preserve capital during market downturns, while still capturing upside potential from equities.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Industrials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Energy
    6%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

The portfolio is diversified across multiple sectors, with technology (26%), financial services (16%), and industrials (13%) being the largest allocations. While this sector allocation captures growth opportunities, it also exposes the portfolio to sector-specific risks. The heavy technology weighting may lead to increased volatility, especially during periods of market correction. To mitigate this risk, consider rebalancing the portfolio to achieve a more even sector distribution, which can enhance stability and reduce exposure to sector-specific downturns.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 98.97% of assets allocated there. This focus on U.S. equities reflects confidence in the American market but also exposes the portfolio to regional risks. By diversifying into international markets, the portfolio can potentially capture growth opportunities in emerging economies and mitigate regional risks. Consider adding exposure to developed and emerging markets outside of North America to enhance geographic diversification and reduce reliance on U.S. market 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 optimization chart suggests opportunities to enhance diversification and potentially improve risk-adjusted returns. By moving along the efficient frontier, the portfolio can be adjusted to achieve a more conservative or riskier profile. To pursue a conservative approach, consider increasing bond allocations or other lower-risk assets. For a riskier profile, focus on growth-oriented equities. Before optimizing, ensure the portfolio aligns with your financial goals and risk tolerance. Prioritize diversification and cost efficiency to create a balanced investment strategy.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Invesco S&P MidCap Quality ETF 4.70%
  • Weighted yield (per year) 1.61%

The portfolio's total dividend yield stands at 1.61%, with contributions from Avantis U.S. Small Cap Value ETF (1.5%), Vanguard S&P 500 ETF (1.2%), and Invesco S&P MidCap Quality ETF (4.7%). While the yield is relatively modest, it provides a steady income stream. The high yield from the Invesco ETF boosts overall returns, but the portfolio's focus on growth stocks limits dividend income. To increase income, consider reallocating some assets to dividend-focused funds or stocks, which can provide higher yields and enhance total returns.

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 0.1%, indicating low investment costs. This is primarily due to the low expense ratio of the Vanguard S&P 500 ETF at 0.03%. Keeping costs low is crucial for maximizing net returns over time. The slightly higher costs of the Avantis and Invesco ETFs are justified by their specialized investment strategies. To maintain cost efficiency, regularly review and compare expense ratios of current holdings with other investment options, ensuring that the portfolio remains cost-effective without sacrificing performance.

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