Growth-Oriented Portfolio with Strong Historic Performance and Broad Diversification Across Sectors and Geographies

Report created on Dec 3, 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 composed of four ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 40%. It also includes an Avantis U.S. Small Cap Value ETF at 20%, and two international-focused ETFs, the Vanguard International Dividend Appreciation Index Fund ETF Shares and the Vanguard Total International Stock Index Fund ETF Shares, each at 20%. This composition suggests a focus on growth with a mix of large-cap U.S. equities and international diversification. The portfolio is broadly diversified, spreading risk across multiple sectors and regions, which can help reduce volatility over time.

Growth Info

Hypothetically, if an initial investment was made in this portfolio, it would have shown a strong historical performance with a CAGR of 14.52%. However, it experienced a maximum drawdown of -35.89%, indicating significant volatility during market downturns. This performance suggests that while the portfolio has the potential for high returns, it also carries a considerable risk. Investors should be prepared for fluctuations in value and ensure they have the risk tolerance to withstand such volatility, particularly during periods of market stress.

Projection Info

Using a Monte Carlo simulation, which runs thousands of scenarios to predict potential future performance, the portfolio shows promising results. With a hypothetical initial investment, the median scenario projects a 393.65% return, with a 67th percentile scenario reaching 606.08%. This indicates a high potential for growth, but there are still risks, as shown by the 5th percentile at 19.84%. The simulation suggests that most scenarios result in positive returns, aligning with the portfolio's growth objective. Investors should remain aware of the potential for both high returns and losses.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, accounting for 99.6% of the asset allocation, with minimal cash and other assets. This high concentration in equities aligns with a growth-focused strategy, aiming to capitalize on the long-term appreciation potential of stocks. However, the lack of diversification into other asset classes like bonds or real estate may increase the portfolio's volatility. To manage risk, investors might consider incorporating a small allocation to bonds or other asset classes to provide stability and reduce overall portfolio volatility.

Sectors Info

  • Technology
    20%
  • Financials
    18%
  • Industrials
    14%
  • Health Care
    11%
  • Consumer Discretionary
    10%
  • Consumer Staples
    7%
  • Energy
    6%
  • Telecommunications
    5%
  • Basic Materials
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is well-distributed, with technology leading at 20.04%, followed by financial services and industrials. This diversification across sectors helps mitigate risks associated with downturns in any specific industry. However, the portfolio's exposure to cyclical sectors like technology and financial services may increase its sensitivity to economic cycles. Investors should be aware of this and consider balancing the portfolio with more defensive sectors if they wish to reduce cyclical risk. A review of sector performance trends could guide adjustments to maintain a balanced approach.

Regions Info

  • North America
    63%
  • Europe Developed
    18%
  • Japan
    8%
  • Asia Emerging
    5%
  • Asia Developed
    3%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly invested in North America at 63.42%, followed by Europe Developed and Japan. This allocation provides exposure to established markets, which can offer stability and growth potential. While the portfolio includes emerging markets, the exposure is relatively limited. This geographic diversification can help capture growth opportunities globally, but investors should be aware of the potential risks associated with currency fluctuations and geopolitical events. To optimize global exposure, reviewing regional performance and adjusting allocations as needed could be beneficial.

Redundant positions Info

  • Vanguard International Dividend Appreciation Index Fund ETF Shares
    Vanguard Total International Stock Index Fund ETF Shares
    High correlation

The portfolio includes highly correlated assets like the Vanguard International Dividend Appreciation Index Fund ETF Shares and the Vanguard Total International Stock Index Fund ETF Shares. High correlation among assets can limit diversification benefits, as they tend to move in the same direction during market swings. This could increase the portfolio's overall risk. Investors should consider reducing overlap by selecting funds with lower correlation to enhance diversification. This approach can help mitigate risk and improve the portfolio's resilience against market volatility.

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 that before optimizing, the focus should be on reducing asset overlap, as highly correlated assets can limit diversification benefits. To achieve a riskier or more conservative portfolio, moving along the efficient frontier is key. Investors can increase risk by shifting towards equities with higher growth potential or decrease risk by incorporating more stable assets like bonds. It's essential to balance risk and return according to individual goals and risk tolerance. Optimizing the portfolio requires careful consideration of asset allocation and correlation.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard International Dividend Appreciation Index Fund ETF Shares 2.00%
  • 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 offers a modest dividend yield of 1.78%, with the Vanguard Total International Stock Index Fund ETF Shares providing the highest yield at 3%. Dividends can contribute to total returns and provide a steady income stream, which is beneficial for reinvestment or income-focused strategies. While the focus of this portfolio is growth, the inclusion of dividend-paying ETFs adds a layer of stability. Investors seeking higher income may need to reassess their allocations or consider additional dividend-focused investments to boost the portfolio's yield.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard International Dividend Appreciation Index Fund ETF Shares 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock 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 relatively low, indicating cost-efficiency. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, is particularly cost-effective. Keeping investment costs low is crucial as it directly impacts net returns. The low TER aligns with the portfolio's growth strategy by maximizing returns over time. Investors should continue to monitor expense ratios and consider cost-effective options when making changes to the portfolio. This approach ensures that costs do not erode potential gains, maintaining the portfolio's cost-effectiveness.

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