A well-diversified growth-focused portfolio with a strong North American equity concentration

Report created on Jan 16, 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 consists of six ETFs, with a significant 42% allocation to the Vanguard Total Stock Market Index Fund ETF. This indicates a strong focus on broad U.S. equity exposure. The remaining assets are spread across international developed and emerging markets, small-cap value, and extended duration Treasury bonds. Compared to a typical growth portfolio, this composition leans heavily towards equities, which is common for those seeking higher returns. Consider diversifying further by exploring alternative asset classes to potentially reduce risk, especially in volatile markets.

Growth Info

Historically, the portfolio has shown a strong Compound Annual Growth Rate (CAGR) of 11.29%, which is impressive for a growth-oriented portfolio. However, it has also experienced a maximum drawdown of -31.3%, highlighting the inherent risk of such a strategy. While past performance is not indicative of future results, these figures suggest a robust return potential, albeit with significant volatility. To mitigate potential losses, consider maintaining an emergency fund or exploring hedging strategies.

Projection Info

The Monte Carlo simulation, which uses historical data to predict potential future outcomes, shows a wide range of projected returns. The portfolio's 50th percentile outcome suggests a 131.16% increase, while the 5th percentile indicates a potential -42.43% decline. With 857 out of 1,000 simulations yielding positive returns, the annualized return is projected at 8.96%. Remember, these projections are based on historical trends and uncertainties remain, so it's wise to review your risk tolerance and adjust allocations if necessary.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio is heavily weighted towards equities, comprising 89.25% of the total allocation, with a smaller 10% allocation to bonds. This tilt towards stocks aligns with a growth strategy, aiming for higher returns at the expense of increased volatility. Compared to typical benchmarks, the bond allocation is relatively low, which might expose the portfolio to more risk during market downturns. Consider increasing bond exposure or other fixed-income assets to provide stability and income, especially during periods of market uncertainty.

Sectors Info

  • Technology
    18%
  • Financials
    17%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    7%
  • Telecommunications
    6%
  • Energy
    5%
  • Basic Materials
    5%
  • Consumer Staples
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector-wise, the portfolio is well-diversified, with the largest allocation to technology (18.32%), followed by financial services and industrials. This distribution is typical for a growth-focused strategy, though it may result in higher volatility, especially during tech market corrections. The portfolio's sector composition aligns well with benchmark data, providing a good balance across different industries. Regularly reviewing sector trends and adjusting allocations can help maintain diversification and mitigate sector-specific risks.

Regions Info

  • North America
    57%
  • Europe Developed
    11%
  • Asia Emerging
    8%
  • Japan
    5%
  • Asia Developed
    4%
  • Africa/Middle East
    2%
  • Australasia
    2%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, which accounts for 56.9% of the allocation. This is complemented by significant exposure to Europe, Asia, and other regions. While this distribution provides a good level of international diversification, it may limit exposure to emerging markets, which can offer higher growth potential. Consider increasing allocations to underrepresented regions to enhance diversification and capture growth opportunities in emerging economies, while being mindful of geopolitical risks.

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's current allocation may not sit on the Efficient Frontier, a concept that represents the best possible risk-return trade-off. Adjusting the weights of existing assets, particularly by balancing stock and bond allocations, could optimize the portfolio for better efficiency. This means achieving the maximum expected return for a given level of risk. Consider using optimization tools or consulting with a financial advisor to explore potential adjustments, ensuring the portfolio aligns with your risk tolerance and return objectives.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.70%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
  • Weighted yield (per year) 2.24%

The portfolio's dividend yield is 2.24%, with notable contributions from the Avantis International Small Cap Value ETF and the Vanguard Extended Duration Treasury Index Fund ETF. Dividends can provide a steady income stream, particularly beneficial in volatile markets. While growth-focused portfolios often prioritize capital appreciation over income, maintaining a balance of dividend-paying assets can enhance total returns and provide a cushion during market downturns. Regularly review dividend policies and yields to ensure they align with your income needs.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • 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) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, which is impressively low and enhances long-term returns by minimizing costs. Low fees are a significant advantage, as they compound over time, allowing a greater portion of returns to be retained. This cost efficiency aligns well with best practices in portfolio management. To maintain this advantage, regularly review expense ratios and consider replacing any high-fee assets with comparable lower-cost alternatives, ensuring the portfolio remains cost-effective and competitive.

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