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

Report created on Dec 14, 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 comprises three exchange-traded funds (ETFs) with a significant emphasis on large-cap U.S. equities, as 55% is allocated to the Vanguard S&P 500 ETF. Additionally, 30% is invested in international equities through the Vanguard Total International Stock Index Fund ETF Shares, and 15% is in U.S. small-cap value stocks via the Avantis® U.S. Small Cap Value ETF. This composition favors growth-oriented investments, primarily within the U.S. market. Such a focus on equities can drive higher returns but also entails greater risk, particularly during market downturns. To balance the portfolio, consider diversifying into other asset classes like bonds or real estate, which can provide stability and reduce volatility over time.

Growth Info

Historically, the portfolio has delivered a compound annual growth rate (CAGR) of 14.93%, indicating robust past performance. However, it also experienced a maximum drawdown of -35.73%, highlighting the potential for significant losses during market downturns. The returns are concentrated, with just 15 days accounting for 90% of the gains, suggesting a reliance on short bursts of market movement. While historical performance can provide insight, it's not a guarantee of future results. It's important to consider strategies that can mitigate drawdowns, such as incorporating defensive assets or adjusting allocations to reduce volatility.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential future outcomes, indicates a wide range of possibilities for this portfolio. With a 50th percentile outcome of 485.35% and a 67th percentile of 806.22%, the projections suggest substantial growth potential. However, the 5th percentile outcome of 19.49% highlights the risk of underperformance. While simulations provide valuable insights, they are based on historical trends and assumptions. To optimize future performance, consider regularly reviewing and adjusting the portfolio based on changing market conditions and personal financial goals.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted towards equities, with 99.48% in stocks, leaving minimal allocation to cash and other asset classes. This concentration in stocks aligns with a growth-oriented strategy but increases exposure to market volatility. Diversification across different asset classes can help mitigate risk and smooth returns over time. Including fixed income or alternative investments may provide a buffer during equity market downturns. Evaluating the balance between risk and return is crucial to achieving long-term financial objectives while maintaining a level of risk that aligns with personal tolerance.

Sectors Info

  • Technology
    23%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is led by technology (23%), financial services (17.66%), and industrials (11.51%), reflecting a diverse but concentrated exposure to major economic sectors. This distribution benefits from potential growth in these areas but may also expose the portfolio to sector-specific risks. While the portfolio covers various sectors, consider the potential impacts of economic cycles or regulatory changes on these industries. Regularly reviewing sector allocations and adjusting them based on market trends and economic conditions can help maintain a balanced risk-return profile.

Regions Info

  • North America
    72%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic allocation is predominantly in North America (71.69%), with additional exposure to developed markets in Europe and Asia. This concentration in the U.S. market leverages its economic strength but may limit benefits from growth opportunities in emerging markets. While developed markets offer stability, emerging markets can provide diversification and potential for higher returns. To enhance geographic balance, consider increasing exposure to regions with different economic cycles or growth prospects, which can reduce overall portfolio risk and tap into global growth trends.

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 can be optimized using the Efficient Frontier, a concept that identifies the best possible risk-return ratio for a given set of assets. By adjusting allocations among current holdings, the portfolio can potentially achieve higher returns for the same level of risk or reduce risk without sacrificing returns. This optimization focuses on enhancing efficiency rather than diversification. Regularly reviewing the portfolio's position on the Efficient Frontier can ensure alignment with financial goals and risk tolerance, adapting to changes in market conditions and personal circumstances.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.78%

The portfolio's dividend yield stands at 1.78%, with contributions from all three ETFs. The Vanguard Total International Stock Index Fund ETF Shares offers the highest yield at 3%, providing a steady income stream. While dividends enhance total returns, focusing solely on yield can overlook growth opportunities. Balancing income-generating assets with growth-focused investments can achieve a comprehensive strategy that meets both current income needs and long-term capital appreciation goals. Regularly reassessing dividend policies and their impact on overall returns can optimize portfolio performance.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 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 (TER) is 0.08%, reflecting low costs primarily due to the Vanguard S&P 500 ETF's minimal fee of 0.03%. Keeping costs low is crucial for maximizing returns over time, as high fees can erode gains. While the Avantis® U.S. Small Cap Value ETF has a higher expense ratio of 0.25%, it provides diversification benefits that may justify the cost. Regularly reviewing and comparing fund expenses can ensure the portfolio remains cost-effective while meeting investment objectives. Consider rebalancing to maintain a cost-efficient structure.

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