A balanced portfolio with strong US focus and moderate international diversification

Report created on Dec 12, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of six ETFs with a significant emphasis on US equities, constituting 60% of the allocation. The remaining 40% is diversified across international markets, including emerging markets. This mix provides a broad exposure to different economic conditions. A balanced portfolio like this aims to capture growth while managing risk. To enhance diversification, consider increasing exposure to underrepresented regions or asset classes, such as bonds or real estate, to balance the heavy equity focus.

Growth Info

Historically, this portfolio has shown a CAGR of 10.18%, indicating solid growth over time. However, it has also experienced a maximum drawdown of 23.3%, reflecting potential volatility. Historical performance is not a guarantee of future results, as market conditions can change. If you are concerned about drawdowns, consider adding more stable assets, like bonds, to reduce volatility. Balancing risk and return is key to maintaining a resilient portfolio.

Projection Info

The Monte Carlo simulation runs 1,000 scenarios to project future outcomes based on historical data. The median outcome suggests a 134.2% increase, while the worst-case scenario shows a potential loss of 22.56%. Simulations provide a range of possibilities but are not predictive. They highlight potential risks and returns under various market conditions. To prepare for uncertainty, consider diversifying further or adjusting asset allocations to align with your risk tolerance and investment goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

Stocks dominate the asset allocation, comprising over 99% of the portfolio, with negligible allocations to cash, bonds, and other assets. This heavy stock concentration can lead to high volatility but also offers potential for substantial growth. Diversifying into other asset classes, such as bonds or real estate, can provide stability and income, reducing overall risk. Balancing asset classes is crucial for achieving a risk-return profile that matches your investment objectives.

Sectors Info

  • Financials
    21%
  • Technology
    16%
  • Industrials
    14%
  • Consumer Discretionary
    13%
  • Energy
    8%
  • Basic Materials
    7%
  • Health Care
    6%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation shows a notable concentration in financial services, technology, and industrials, each exceeding 14%. This concentration can lead to sector-specific risks if these industries face downturns. Diversifying across more sectors can mitigate these risks and provide a smoother return profile. Consider reallocating some funds into underrepresented sectors such as utilities or consumer defensive, which can offer stability during economic downturns.

Regions Info

  • North America
    61%
  • Asia Emerging
    11%
  • Europe Developed
    10%
  • Asia Developed
    6%
  • Japan
    5%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Australasia
    2%

With 61.5% exposure to North America, this portfolio is heavily weighted towards the US market. While this provides access to a stable and mature economy, it limits exposure to potentially high-growth regions like Asia or Latin America. Increasing geographic diversification can help capture growth in emerging markets and reduce reliance on US economic performance. Consider adjusting allocations to achieve a more balanced global exposure.

Redundant positions Info

  • Avantis® International Small Cap Value ETF
    Vanguard FTSE Developed Markets Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets, particularly among international small-cap and developed markets ETFs. High correlation means these assets tend to move together, offering limited diversification benefits. To enhance diversification, consider replacing some of these correlated assets with others that have a lower correlation, thereby reducing portfolio risk and improving the risk-return profile.

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 potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. Optimization does not necessarily mean adding new assets but adjusting existing allocations for efficiency. By focusing on the current assets and reallocating between them, you can enhance returns for a given level of risk or reduce risk for a given level of returns. Regularly review and adjust allocations to maintain an optimal balance.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.00%
  • Avantis® Emerging Markets Value ETF 3.60%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 2.03%

The portfolio's overall dividend yield is 2.03%, with higher yields from international and emerging market ETFs. Dividends can provide a steady income stream, which is beneficial in volatile markets. To increase income, consider allocating more to high-dividend assets. However, balance this with growth potential, as high-dividend stocks may not offer the same growth opportunities as lower-yielding, high-growth stocks.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.17%

The portfolio's total expense ratio (TER) is 0.17%, which is relatively low, indicating cost efficiency. Lower costs can significantly improve long-term returns by minimizing the drag on performance. Continuously monitor and compare expense ratios to ensure competitive pricing. Consider rebalancing or replacing high-cost ETFs with lower-cost alternatives to further enhance cost efficiency and maximize net returns.

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