Balanced Growth Portfolio with High Technology Exposure and Broad Geographic Diversification

Report created on Nov 10, 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 significant 40% allocation to the Vanguard Information Technology Index Fund. This concentration in technology suggests a tech-forward strategy, while the remaining funds provide a mix of small-cap value and international exposure. Such a composition offers both growth potential and diversification. The blend of U.S. small-cap and developed and emerging markets enhances the portfolio's diversification. However, the heavy reliance on technology could expose the portfolio to sector-specific risks. Diversifying further across sectors might mitigate this risk.

Growth Info

Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 18.55%. This impressive return is tempered by a maximum drawdown of -35.93%, indicating substantial volatility. Such a performance suggests that the portfolio has benefited from the tech sector's growth, but it also highlights the potential for significant losses during downturns. Investors should be prepared for this level of volatility and consider their risk tolerance. Maintaining a long-term perspective can help manage the emotional impact of such fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation shows a median return of 494.08%, implying strong growth potential, while the 5th percentile reflects a more conservative 17.59% return. With 967 simulations yielding positive returns, the portfolio exhibits a high probability of future gains. This method helps assess potential outcomes by considering various market scenarios. Investors should use these projections to gauge their comfort with potential returns and risks, adjusting their strategy accordingly to align with their financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, with 99.04% of the allocation, offering substantial growth opportunities. The minimal cash and other asset class allocations suggest a focus on maximizing returns rather than preserving capital. This stock-centric approach is suitable for investors seeking growth, but it may expose them to higher risk during market downturns. To balance risk, investors might consider incorporating a small allocation to bonds or other asset classes, which can provide stability and reduce overall volatility, especially in uncertain market conditions.

Sectors Info

  • Technology
    46%
  • Financials
    15%
  • Industrials
    10%
  • Consumer Discretionary
    8%
  • Energy
    6%
  • Basic Materials
    4%
  • Consumer Staples
    3%
  • Health Care
    3%
  • Telecommunications
    2%
  • Real Estate
    1%
  • Utilities
    1%

Sector-wise, the portfolio is dominated by technology, comprising 46.02% of the total allocation. Financial services and industrials also have significant shares, at 15.19% and 9.76%, respectively. This sector allocation reflects a growth-oriented strategy, with a strong emphasis on industries poised for innovation and expansion. However, such concentration in technology could increase vulnerability to sector-specific downturns. Investors may want to consider diversifying into sectors like healthcare or consumer staples to mitigate risk and enhance stability, ensuring a more balanced exposure across different economic cycles.

Regions Info

  • North America
    71%
  • Asia Emerging
    9%
  • Europe Developed
    8%
  • Asia Developed
    4%
  • Japan
    3%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, accounting for 70.68% of the allocation. Emerging Asia and developed Europe follow, with 9.16% and 8.25%, respectively. This geographic distribution provides a mix of stability from developed markets and growth potential from emerging economies. While the North American focus aligns with the investor's region, diversifying further into other regions could reduce regional risk. Exploring opportunities in underrepresented areas might enhance returns and provide a hedge against potential downturns in the North American market.

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 potential for further optimization, though the current allocation already aligns well with growth objectives. Investors can achieve a riskier portfolio by increasing exposure to high-growth sectors or regions, while a more conservative approach might involve reallocating towards bonds or defensive sectors. Moving along the efficient frontier allows investors to balance risk and return according to their preferences. Before making changes, it's essential to consider the overall investment strategy and risk tolerance, ensuring any adjustments align with long-term financial goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.54%

The portfolio offers a modest dividend yield of 1.54%, with the Vanguard FTSE Developed Markets Index Fund contributing the highest yield at 3.0%. This yield provides some income, albeit limited, which can be beneficial for reinvestment and compounding growth. While the focus is on growth, the inclusion of dividend-paying assets adds a layer of income stability. Investors looking to enhance their income stream might consider reallocating a portion of their holdings to higher-yielding assets, balancing growth and income to meet their financial objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.13%

The portfolio's total expense ratio is 0.13%, indicating a cost-effective structure. The low fees associated with the Vanguard ETFs contribute to keeping overall costs down, which is crucial for maximizing net returns. This cost efficiency is beneficial for long-term investors, as high fees can erode returns over time. Maintaining a focus on low-cost investments is a smart strategy. Investors should regularly review and compare expense ratios across their holdings to ensure they are not overpaying for fund management, thereby optimizing their investment performance.

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