Growth-Oriented Portfolio with Broad Diversification and High Risk Tolerance for Long-Term Investors

Report created on Aug 11, 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 equities, with 99.5% in stocks, showcasing a strong growth orientation. The largest position is the Vanguard Total Stock Market Index Fund ETF Shares, which makes up 65% of the portfolio. This is complemented by international exposure through the Vanguard Total International Stock Index Fund ETF Shares at 20%. The inclusion of Avantis U.S. and International Small Cap Value ETFs adds a value tilt. This composition indicates a focus on capital appreciation, with limited exposure to bonds or alternative assets.

Growth Info

Historically, the portfolio has delivered impressive returns, boasting a compound annual growth rate (CAGR) of 15.16%. However, this comes with significant volatility, as evidenced by a maximum drawdown of -35.99%. This performance suggests that while the portfolio has the potential for high returns, it can also experience substantial declines in value. Understanding this trade-off is crucial for investors, as it highlights the importance of aligning investment choices with risk tolerance and long-term goals.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This statistical method helps estimate potential outcomes by considering various scenarios. The results indicate a median growth of 432.83% over the investment horizon, with a high probability of positive returns, as 974 simulations were favorable. This suggests a promising outlook, but investors should remain aware of the inherent uncertainties and be prepared for fluctuations in returns, as indicated by the range of possible outcomes.

Asset classes Info

  • Stocks
    99%

The portfolio is predominantly invested in stocks, with a negligible allocation to cash and bonds. This concentration in equities aligns with a growth-focused strategy, aiming for capital appreciation over stability. While this can lead to higher returns, it also increases risk, particularly during market downturns. Investors should consider their comfort with volatility and whether a more balanced allocation could better suit their risk profile, potentially incorporating bonds or alternative assets to mitigate risk.

Sectors Info

  • Technology
    23%
  • Financials
    17%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is well-diversified across sectors, with significant allocations in technology, financial services, and industrials. Technology leads with over 23%, reflecting a growth-oriented stance. This sector diversification can help reduce risk by spreading investments across different areas of the economy. However, investors should monitor sector weightings to ensure they align with their expectations and risk tolerance, as overexposure to any single sector could increase vulnerability to sector-specific downturns.

Regions Info

  • North America
    77%
  • Europe Developed
    10%
  • Japan
    5%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly concentrated in North America, accounting for over 76% of holdings. This is complemented by exposure to developed markets in Europe and Japan, with smaller allocations in emerging markets. While this geographic distribution provides a degree of international diversification, it also leaves the portfolio heavily reliant on the North American market. Investors might consider whether additional geographic diversification could enhance resilience against regional economic fluctuations.

Redundant positions Info

  • Vanguard Total International Stock Index Fund ETF Shares
    Avantis® International Small Cap Value ETF
    High correlation

The portfolio exhibits high correlation between certain assets, particularly the Vanguard Total International Stock Index Fund ETF Shares and the Avantis International Small Cap Value ETF. This indicates that these assets tend to move in tandem, potentially reducing diversification benefits. While some correlation is expected, excessive overlap can limit the portfolio's ability to mitigate risk through diversification. Investors should assess whether adjusting these allocations could improve risk management and overall portfolio efficiency.

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.

Before optimizing the portfolio, focus on reducing overlap among highly correlated assets to enhance diversification benefits. To achieve a riskier or more conservative portfolio, consider moving along the efficient frontier. Adjusting allocations between asset classes, such as increasing bonds for a conservative approach or equities for higher risk, can help align the portfolio with desired risk levels. This strategic adjustment can optimize returns while managing risk effectively, ensuring alignment with investment goals.

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 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.75%

The portfolio offers a modest dividend yield of 1.75%, with contributions from all included ETFs. The Avantis International Small Cap Value ETF provides the highest yield at 3.1%. While dividends can provide a steady income stream and help cushion against market volatility, the portfolio's primary focus remains on growth. Investors seeking higher income might consider increasing allocations to higher-yielding assets, though this could impact the overall growth potential.

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) 0.08%

The portfolio's total expense ratio is relatively low at 0.08%, reflecting cost-efficient management. The Vanguard ETFs contribute to this low cost, with expense ratios ranging from 0.03% to 0.08%. Keeping costs low is crucial for maximizing net returns over time. Investors should continue to monitor expense ratios to ensure they remain competitive, as high costs can erode investment gains. Maintaining a focus on low-cost investments can significantly enhance long-term performance.

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