Growth-Focused Portfolio with Broad Diversification and Moderate Risk for Long-Term Investors Seeking Capital Appreciation

Report created on Dec 3, 2024

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 composed of four ETFs, with a strong focus on equities, accounting for almost the entire allocation. It includes a mix of U.S. and international stocks, with a significant portion dedicated to small-cap value ETFs. This composition suggests a growth-oriented strategy, aiming for capital appreciation through exposure to diverse markets. The high allocation to equities indicates a preference for potential higher returns, albeit with increased volatility. To optimize, consider balancing this with some fixed-income assets to cushion against market downturns.

Growth Info

Historically, this portfolio has performed well, with a hypothetical initial investment achieving a compound annual growth rate (CAGR) of 15.04%. However, the maximum drawdown of -38.55% indicates significant volatility, reflecting its growth-oriented nature. This performance suggests that while the portfolio has the potential for substantial gains, it also carries the risk of considerable losses. To enhance stability, consider incorporating strategies to mitigate drawdowns, such as diversifying further into less volatile asset classes.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a wide range of potential outcomes for a hypothetical initial investment. The median projection suggests a 404.67% return, with a 5th percentile return of 15.24% and a 67th percentile return of 651.08%. This indicates a high probability of positive returns, with 970 simulations showing gains. The simulation underscores the portfolio's growth potential but also highlights the uncertainty inherent in market investments. Regularly reviewing and rebalancing can help manage risks and align with evolving financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with an allocation of 99.39%, leaving minimal exposure to other asset classes like cash and bonds. This high equity concentration aligns with a growth-focused strategy but also increases susceptibility to market fluctuations. While equities offer potential for higher returns, consider diversifying into bonds or other asset classes to reduce risk and provide a buffer during market downturns. This could enhance the portfolio's resilience and offer more balanced risk-adjusted returns.

Sectors Info

  • Financials
    20%
  • Technology
    18%
  • Industrials
    14%
  • Consumer Discretionary
    13%
  • Health Care
    8%
  • Energy
    7%
  • Basic Materials
    6%
  • Consumer Staples
    5%
  • Telecommunications
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is diversified across various industries, with significant exposure to financial services, technology, and industrials. This spread across sectors helps mitigate risks associated with sector-specific downturns. However, the portfolio could benefit from further diversification into sectors like healthcare or utilities, which tend to be more stable during economic slowdowns. By ensuring a balanced sector allocation, the portfolio can better withstand market volatility and capitalize on growth opportunities across different economic cycles.

Regions Info

  • North America
    67%
  • Europe Developed
    14%
  • Japan
    7%
  • Asia Emerging
    4%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic allocation is predominantly in North America, accounting for 67.37%, with additional exposure to developed markets in Europe and Japan. This concentration in North America aligns with a focus on stable, mature markets but may limit exposure to growth opportunities in emerging markets. To enhance diversification, consider increasing allocations to regions with higher growth potential, such as Asia or Latin America. This can provide a more balanced global exposure and reduce reliance on any single geographic area.

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 is well-positioned for growth, but optimization could enhance its risk-return profile. Adjusting the allocation along the efficient frontier can achieve a more conservative or riskier stance. For a riskier portfolio, increase equity exposure, particularly in high-growth sectors. To be more conservative, incorporate bonds or other low-volatility assets. This approach allows for tailored risk management, aligning with individual financial goals and risk tolerance. Focusing on diversification and cost efficiency can further optimize performance.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.92%

The portfolio offers a moderate dividend yield of 1.92%, with contributions from all four ETFs. This yield provides a steady income stream, complementing the growth-oriented strategy. While dividends can help offset some volatility, they are not the primary focus of this portfolio. For investors seeking higher income, consider incorporating dividend-focused assets or funds. Balancing growth and income can enhance overall returns and provide stability, especially during periods of market uncertainty.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • 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) 0.13%

The portfolio's total expense ratio (TER) is 0.13%, reflecting low-cost ETFs that help maximize net returns. This cost efficiency supports long-term growth by minimizing fees that can erode returns over time. Maintaining a low-cost structure is crucial for optimizing performance, especially in volatile markets. To further reduce costs, periodically review and compare fees of current holdings with similar options. Ensuring that the portfolio remains cost-effective can significantly impact overall investment success.

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