A growth-focused portfolio with a strong domestic bias and moderate diversification

Report created on Dec 24, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio consists of three ETFs, with a heavy weighting towards the Vanguard Total Stock Market Index Fund ETF Shares at 60%. Additionally, it includes the Avantis U.S. Small Cap Value ETF at 30% and the Vanguard Total International Stock Index Fund ETF Shares at 10%. This composition leans heavily on domestic equities, aligning with a growth-focused strategy. While this setup can capture broad market gains, it may lack the diversification benefits of including other asset classes like bonds or real estate, which can buffer against market volatility. Considering the current allocation, introducing more varied asset types could enhance resilience during downturns.

Growth Info

The historical performance of this portfolio, with a CAGR of 16.23%, suggests robust growth over time, especially when compared to typical market benchmarks. However, the maximum drawdown of -38.19% indicates significant volatility, which is common in growth-oriented portfolios. This demonstrates the potential for high returns but also underscores the risk involved. Investors should be mindful of this volatility, especially during market downturns, and ensure they have the risk tolerance to withstand such fluctuations. Diversifying into less volatile assets might help mitigate these drawdowns while maintaining growth potential.

Projection Info

The forward projection, using a Monte Carlo simulation with 1,000 iterations, shows promising potential outcomes, with a median return of 403.5% and a high success rate of positive returns. Monte Carlo simulations use historical data to model potential future outcomes, but it's important to remember that they are not predictions. While these results are encouraging, they rely on past performance trends, which may not necessarily continue. To manage expectations, it's wise to regularly review and adjust the portfolio based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for over 99% of the total allocation. This high concentration in equities is typical for a growth-focused strategy, aiming to capture higher returns over the long term. However, this also means increased exposure to stock market volatility. A more balanced allocation might include bonds or alternative investments to reduce risk and provide stability. While equities drive growth, diversifying into other asset classes can help manage risk and smooth out returns over different market cycles.

Sectors Info

  • Technology
    22%
  • Financials
    19%
  • Industrials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Energy
    7%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation in this portfolio is well-distributed, with technology leading at 21.73%, followed by financial services and industrials. This distribution is fairly aligned with common benchmarks, providing a diversified exposure across sectors. However, the concentration in technology could lead to increased volatility, especially during periods of regulatory changes or economic shifts. Monitoring sector trends and rebalancing when necessary can help maintain a balanced approach. Additionally, considering exposure to underrepresented sectors may further enhance diversification and reduce sector-specific risks.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily concentrated in North America, making up nearly 90% of the allocation. While this reflects a strong domestic focus, it limits exposure to international markets, which can offer growth opportunities and diversification benefits. Expanding geographic exposure to include more developed and emerging markets could enhance the portfolio's resilience against regional economic downturns. By diversifying geographically, investors can potentially capture growth from global economic developments and reduce reliance on the performance of a single region.

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.

Given the current asset allocation, there is potential for optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the weights of existing assets to find a more efficient balance. While the portfolio's current setup is growth-focused, exploring different combinations could enhance returns for the same level of risk or reduce risk for the same level of return. Regularly reassessing the portfolio's positioning on the Efficient Frontier can ensure it remains aligned with the investor's risk tolerance and financial goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.90%
  • Vanguard Total International Stock Index Fund ETF Shares 1.70%
  • Weighted yield (per year) 1.19%

The portfolio's overall dividend yield is 1.19%, with individual yields from the ETFs ranging from 0.9% to 1.7%. While not a primary focus for growth-oriented portfolios, dividends can provide a steady income stream and contribute to total returns. For investors seeking more income, increasing exposure to higher-yielding assets could be beneficial. However, it's important to balance income generation with growth potential, as high dividend yields may sometimes come with increased risk. Regularly reviewing dividend policies and their alignment with investment goals is advisable.

Ongoing product costs Info

  • 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) 0.10%

The total expense ratio (TER) for this portfolio is 0.1%, which is impressively low and supports better long-term performance by minimizing costs. Lower costs mean more of the portfolio's returns are retained, enhancing compounding effects over time. While this is a positive aspect, it's still beneficial to periodically review fees and explore opportunities to further reduce costs, such as switching to lower-cost funds if available. Maintaining cost efficiency is crucial for maximizing net returns and achieving investment objectives.

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