Portfolio with Balanced Growth and Diversification but High Risk Requires Strategic Adjustments for Optimized Performance

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 heavily weighted towards U.S. equities, with a significant focus on large-cap growth and small-cap value stocks. This composition suggests an emphasis on capital appreciation, with a minor allocation to developed and emerging markets. The portfolio is broadly diversified, which is beneficial for managing risk. However, the concentration in U.S. stocks may expose it to regional economic fluctuations. To enhance stability, consider diversifying further into international markets. This could provide a buffer against domestic market volatility and potentially improve long-term returns.

Growth Info

Historically, the portfolio has performed well, boasting a compound annual growth rate (CAGR) of 18.37%. This indicates strong past performance, likely driven by the U.S. large-cap growth stocks. However, a maximum drawdown of -36.26% highlights its vulnerability during market downturns. Understanding this volatility is crucial, as it can impact the portfolio's value significantly. To mitigate future risks, consider incorporating more defensive assets. This approach can help cushion the portfolio against severe market declines while maintaining growth potential.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected, assuming a hypothetical initial investment. The simulation estimates a wide range of outcomes, with a median return of 416.11% and an annualized return of 15.37%. This suggests a strong potential for growth, but the variability in outcomes underscores the importance of managing risk. To align with risk tolerance, consider adjusting the asset allocation. This can help balance the potential for high returns with the need for stability.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly invested in stocks, accounting for over 99% of assets. This heavy equity allocation is typical for a growth-oriented portfolio, aimed at maximizing returns. While equities offer substantial growth potential, they also come with increased risk, especially during market downturns. Introducing more fixed-income assets, such as bonds, can help reduce volatility and provide income. This diversification can enhance the portfolio's resilience and ensure a more balanced risk-return profile over time.

Sectors Info

  • Technology
    28%
  • Financials
    17%
  • Consumer Discretionary
    13%
  • Industrials
    10%
  • Telecommunications
    8%
  • Health Care
    8%
  • Energy
    6%
  • Basic Materials
    5%
  • Consumer Staples
    4%
  • Real Estate
    1%
  • Utilities
    1%

Sector allocation is concentrated in technology and financial services, with significant exposure to consumer cyclicals and industrials. This mix reflects a growth-driven strategy, leveraging sectors with high potential for appreciation. However, overexposure to a few sectors can increase risk if those industries underperform. Diversifying across more sectors can mitigate this risk and provide more consistent returns. A balanced sector allocation can help capture growth opportunities while reducing vulnerability to sector-specific downturns.

Regions Info

  • North America
    77%
  • Asia Emerging
    7%
  • Europe Developed
    7%
  • Asia Developed
    3%
  • Japan
    3%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is heavily skewed towards North America, with over 76% allocation. While this focus can capitalize on the robust U.S. market, it limits exposure to international growth opportunities. A more globally diversified portfolio could benefit from economic growth in other regions, such as Asia or Europe. Expanding geographic allocation can reduce regional risk and enhance overall portfolio performance. Consider increasing exposure to emerging markets, which often offer higher growth potential.

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 improvement by adjusting along the efficient frontier. To achieve a riskier profile, increase equity allocation, focusing on high-growth sectors. Conversely, for a more conservative approach, introduce more fixed-income assets or diversify into low-correlation investments. This strategic shift can help align the portfolio with desired risk-return objectives. Prioritizing diversification and risk management can enhance overall performance, ensuring the portfolio remains resilient in various market conditions.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.32%

The portfolio's dividend yield stands at 1.32%, with contributions from various ETFs, including a notable yield from the Vanguard FTSE Developed Markets Index Fund. While dividends provide a steady income stream, the current yield is relatively modest. For investors seeking higher income, exploring dividend-focused strategies or funds might be beneficial. However, it's essential to balance income generation with growth potential. Consider reinvesting dividends to enhance compounding effects and boost long-term growth.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, which is quite low, indicating cost-efficient management. Low costs are advantageous as they enhance net returns over time. However, it's essential to remain vigilant about any changes in fees, as they can erode gains. Regularly reviewing the expense ratios of individual holdings can ensure the portfolio remains cost-effective. Maintaining a focus on low-cost investments can significantly impact overall performance, especially in the long run.

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