A growth-focused portfolio with high diversification and moderate risk exposure

Report created on Jan 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 94% in stocks, 5% in bonds, and 1% in cash. This structure aligns with a growth-oriented strategy, emphasizing potential capital appreciation. Compared to a typical benchmark, this portfolio leans more towards equities, which can lead to higher returns but also increased volatility. With a focus on ETFs, it benefits from broad market exposure and cost efficiency. To enhance diversification, consider slightly increasing bond allocation, which can provide stability during market downturns. This adjustment can help in balancing risk and return over the long term.

Growth Info

Historically, the portfolio has performed well, with a CAGR of 13.10%. This indicates strong growth over time, outperforming many standard benchmarks. The max drawdown of -34.45% reflects the potential volatility and risk associated with a growth-focused portfolio. It's crucial to understand that past performance does not guarantee future results, and market conditions can change. To mitigate potential drawdowns, consider incorporating more defensive assets or setting stop-loss orders. This strategy can help protect gains during market corrections, ensuring a more stable growth trajectory.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes. The 50th percentile projects a 284.2% return, while the 67th percentile shows 463.2%. However, the 5th percentile indicates a potential slight loss, highlighting inherent risks. Monte Carlo simulations use historical data to predict future performance, but they cannot account for unforeseen events. To prepare for various scenarios, consider maintaining a diversified asset mix and regularly reviewing your portfolio. This proactive approach can help manage risk and capitalize on favorable market conditions.

Asset classes Info

  • Stocks
    94%
  • Bonds
    5%
  • Cash
    1%

The portfolio's asset class allocation is predominantly in stocks, with a small portion in bonds. This composition is typical for a growth strategy, aiming for higher returns through equity exposure. Compared to benchmarks, the bond allocation is lower, which might increase volatility. To enhance risk management, consider gradually increasing bond exposure, which can provide a buffer during equity market downturns. This adjustment can improve the portfolio's risk-return profile, offering more stability without sacrificing growth potential significantly.

Sectors Info

  • Technology
    21%
  • Financials
    17%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation shows a strong emphasis on technology (21%) and financial services (17%). This concentration can lead to higher volatility, especially if these sectors face downturns. Compared to common benchmarks, the portfolio's sector balance is well-aligned, promoting diversification. However, keeping an eye on sector trends is crucial. For example, tech-heavy portfolios may face challenges during interest rate hikes. To mitigate risks, consider diversifying into more defensive sectors like healthcare or consumer staples, which can provide stability during economic fluctuations.

Regions Info

  • North America
    66%
  • Europe Developed
    12%
  • Japan
    5%
  • Asia Emerging
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio has a significant tilt towards North America (66%), with limited exposure to emerging markets. This allocation aligns with many benchmarks but may limit growth opportunities in rapidly developing regions. A more balanced geographic distribution can reduce regional risk and capture global growth. Consider increasing exposure to emerging markets, which can offer diversification benefits and potential higher returns. This strategy can help in leveraging global economic trends, enhancing the portfolio's long-term growth potential.

Market capitalization Info

  • Mega-cap
    33%
  • Large-cap
    25%
  • Mid-cap
    16%
  • Small-cap
    14%
  • Micro-cap
    7%

The portfolio's market capitalization breakdown includes 33% in mega caps and 25% in big caps, providing stability and growth potential. Small and micro-cap exposure (21%) adds the potential for higher returns but also increased volatility. Compared to benchmarks, this distribution is well-balanced, offering a mix of growth and stability. To optimize risk and return, consider maintaining this balance while periodically reviewing market cap allocations. This approach can help in adapting to changing market conditions, ensuring the portfolio remains aligned with your investment goals.

Redundant positions Info

  • SPDR® Portfolio S&P 600 Small Cap ETF
    Avantis® U.S. Small Cap Value ETF
    SPDR Russell Small Cap Completeness
    High correlation
  • Vanguard Total Stock Market Index Fund ETF Shares
    SPDR® Portfolio S&P 500 ETF
    High correlation

The portfolio exhibits high asset correlation, particularly among small-cap ETFs. This correlation can limit diversification benefits, as these assets tend to move together during market fluctuations. While some correlation is expected, excessive overlap can increase risk without adding value. To enhance diversification, consider replacing some highly correlated assets with those that have lower correlation. This strategy can help in reducing portfolio volatility and improving risk-adjusted returns, ensuring a more robust investment approach.

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 could benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. Currently, removing highly correlated assets might improve diversification and efficiency. The Efficient Frontier approach focuses on maximizing returns for a given level of risk, not necessarily increasing diversification. To achieve this, consider reallocating assets to those with lower correlation, enhancing the portfolio's risk-adjusted performance. This strategic adjustment can lead to a more efficient and resilient investment portfolio.

Dividends Info

  • iShares Core U.S. Aggregate Bond ETF 4.10%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • SPDR® Portfolio S&P 500 ETF 1.30%
  • SPDR Russell Small Cap Completeness 1.00%
  • SPDR® Portfolio S&P 600 Small Cap ETF 1.80%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 1.72%

The portfolio's dividend yield stands at 1.72%, with notable contributions from the iShares Core U.S. Aggregate Bond ETF (4.10%) and Vanguard FTSE Emerging Markets Index Fund ETF Shares (3.20%). Dividends provide a steady income stream, which can be reinvested for compounded growth. For a growth-focused portfolio, dividends play a secondary role but can enhance overall returns. Consider reinvesting dividends to maximize compounding benefits. This strategy can help in building wealth over time, supporting long-term financial goals.

Ongoing product costs Info

  • iShares Core U.S. Aggregate Bond ETF 0.03%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • SPDR Russell Small Cap Completeness 0.03%
  • SPDR® Portfolio S&P 600 Small Cap ETF 0.03%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, reflecting cost-efficient management. Lower costs contribute to better long-term performance by minimizing fee-related drag on returns. Compared to industry averages, this TER is highly competitive, supporting the portfolio's growth objectives. To maintain cost efficiency, regularly review expense ratios and consider lower-cost alternatives if available. This vigilance can ensure that more of your investment returns are retained, enhancing the portfolio's overall profitability.

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