A growth-focused portfolio with strong US equity exposure and high sector concentration

Report created on Dec 6, 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 primarily of ETFs, with a significant emphasis on US equities. The Vanguard S&P 500 ETF holds the largest portion at 40%, followed by the Avantis U.S. Small Cap Value ETF and the VanEck Semiconductor ETF, each at 20%. The Vanguard Total International Stock Index Fund ETF Shares also represents 20% of the portfolio. This composition indicates a strong focus on growth, primarily through large-cap US stocks, with a moderate allocation to international equities. To maintain balance, consider diversifying further into other asset classes such as bonds or real estate investment trusts (REITs).

Growth Info

Historically, the portfolio has shown impressive performance with a compound annual growth rate (CAGR) of 19.91%. However, it has also experienced a maximum drawdown of -35.45%, indicating significant volatility. The performance has been driven by a concentrated exposure to US equities, which have performed well in recent years. While past performance is not indicative of future results, it is important for investors to be aware of the potential for large fluctuations in value. Diversifying further or employing hedging strategies could help mitigate this risk.

Projection Info

Forward projections using a Monte Carlo simulation, which runs numerous hypothetical scenarios based on historical data, suggest a wide range of potential outcomes. The median scenario projects an impressive 1,026.73% return, while the worst-case scenario still shows a 92.82% increase. However, these projections are based on historical trends and assumptions, which may not hold true in the future. Investors should use these projections as a guide rather than a guarantee, and consider stress-testing the portfolio against different economic scenarios to better understand potential risks and returns.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, accounting for nearly 100% of the allocation, with minimal exposure to cash and other asset classes. This high concentration in equities suggests a strong growth orientation but also implies higher risk due to lack of diversification. While equities can offer substantial returns, their volatility can affect portfolio stability. To enhance diversification and reduce risk, consider incorporating fixed income securities or alternative investments, which can provide stability and income during market downturns.

Sectors Info

  • Technology
    37%
  • Financials
    15%
  • Industrials
    10%
  • Consumer Discretionary
    9%
  • Health Care
    7%
  • Energy
    5%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation reveals a significant concentration in technology, which makes up over 37% of the portfolio. This concentration can lead to high volatility, as technology stocks are often more sensitive to market changes. While the sector has been a strong performer, overexposure can present risks if the sector faces a downturn. A more balanced sector allocation could be beneficial. Consider increasing exposure to sectors like healthcare or consumer staples, which tend to be more resilient during economic downturns.

Regions Info

  • North America
    77%
  • Europe Developed
    9%
  • Asia Developed
    5%
  • Asia Emerging
    3%
  • Japan
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily exposed to North America, with nearly 77% of assets allocated there. While this reflects the strength of the US market, it limits exposure to potential growth opportunities in other regions. Diversification across different geographic regions can help mitigate risks associated with economic cycles and geopolitical events. Increasing allocations to emerging markets or underrepresented regions like Latin America or Africa could enhance diversification and provide exposure to different growth dynamics.

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, which helps identify the best possible risk-return ratio by adjusting the allocation among current assets. This process involves finding the optimal mix of assets that maximizes returns for a given level of risk. While diversification is important, the Efficient Frontier focuses solely on achieving the most efficient allocation based on existing holdings. Regularly reviewing and adjusting the portfolio in line with this principle can enhance performance and ensure alignment with your risk tolerance and investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.44%

The portfolio's dividend yield stands at 1.44%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 2.9%. While dividends provide a steady income stream, the overall yield is modest given the portfolio's growth focus. Investors seeking higher income might consider reallocating a portion of the portfolio to dividend-focused funds or stocks. However, it is crucial to balance the pursuit of yield with the overall growth strategy to avoid compromising long-term capital appreciation.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, with the highest cost associated with the VanEck Semiconductor ETF at 0.35%. While these costs are relatively low, they can still impact long-term returns, especially in a growth-focused portfolio. Minimizing costs is crucial for maximizing returns over time. Consider reviewing the expense ratios of each holding and exploring lower-cost alternatives that align with your investment strategy. Also, regularly monitoring and rebalancing the portfolio can help maintain cost efficiency.

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