Balanced Growth Portfolio with High U.S. Exposure and Diversified Sector Allocation for Moderate Risk Investors

Report created on Nov 21, 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 three main ETFs: Vanguard S&P 500 ETF, Avantis U.S. Small Cap Value ETF, and Vanguard Total International Stock Index Fund ETF. With 60% allocated to the S&P 500, it heavily leans on large-cap U.S. equities. The remaining 40% is split equally between U.S. small-cap value stocks and international equities. This composition provides a broad diversification across both market capitalization and geographic regions. Such a setup is essential for spreading risk and capturing growth opportunities across different markets.

Growth Info

Historically, the portfolio has delivered a strong CAGR of 16.2%, indicating robust performance over time. A hypothetical initial investment would have seen substantial growth, albeit with a significant max drawdown of 36.31%. This performance suggests potential for high returns, but also highlights the risk of notable short-term losses. Investors should be prepared for volatility while enjoying the benefits of long-term growth. Balancing expectations with the potential for downturns is crucial for maintaining confidence in the investment strategy.

Projection Info

Using a Monte Carlo simulation, which runs numerous scenarios to forecast potential outcomes, the portfolio shows promising future growth. With a hypothetical initial investment, the median scenario projects a 517.33% increase, while even the more conservative 5th percentile scenario forecasts a 46.4% rise. The annualized return across simulations is 16.6%, indicating consistency with historical performance. This suggests a strong likelihood of positive returns, although investors should remain aware of the inherent uncertainties in future market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with nearly 100% allocation, and minimal exposure to cash and other asset classes. Such a focus on equities aligns with a growth-oriented strategy, aiming for capital appreciation. However, this concentration also implies higher volatility and risk. Investors seeking to mitigate risk may consider diversifying into other asset classes like bonds or real estate to balance the portfolio. This approach can help cushion against market downturns while still pursuing growth.

Sectors Info

  • Technology
    24%
  • Financials
    18%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Energy
    6%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation within the portfolio is diverse, with significant exposure to technology, financial services, and consumer cyclicals. Technology leads with 23.68%, reflecting its dominant role in driving market growth. This sectoral diversification helps mitigate risks associated with individual industries while capturing potential gains across various economic segments. To maintain a balanced approach, it's essential to periodically review sector weightings and adjust as needed to align with changing market conditions and personal investment goals.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with 80.77% exposure, followed by smaller allocations to Europe and Asia. This strong U.S. bias offers stability and familiarity but may limit exposure to emerging market growth opportunities. While the current composition benefits from the strength of the U.S. market, diversifying further into international regions could enhance growth potential and reduce geographic risk. Regularly assessing geographic allocations ensures alignment with global economic trends and investor preferences.

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 efficient frontier suggests potential for optimization by adjusting risk exposure. Moving towards a riskier profile could involve increasing equity allocations or exploring higher-growth sectors. Conversely, a more conservative approach might include diversifying into bonds or other low-volatility assets. However, given the current broad diversification and balanced risk profile, immediate optimization may not be necessary. Instead, focusing on maintaining alignment with personal financial goals and risk tolerance could be more beneficial in the short term.

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 2.90%
  • Weighted yield (per year) 1.60%

With a total dividend yield of 1.6%, the portfolio provides a modest income stream, primarily from the Vanguard Total International Stock Index Fund ETF. Dividends can serve as a valuable component of total returns, offering regular income alongside capital appreciation. Investors seeking higher income may explore opportunities to increase dividend exposure, balancing yield with growth potential. Maintaining a focus on dividend-paying assets can enhance portfolio stability and provide a buffer during market downturns.

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 is a low 0.08%, reflecting cost-efficient investment choices. Keeping costs minimal is crucial for maximizing net returns, as high fees can erode gains over time. This cost-conscious approach aligns well with long-term investment success. Investors should continue to monitor expense ratios and seek opportunities to maintain or reduce costs further. Staying vigilant on fees ensures that more of the portfolio's growth is retained, contributing to overall financial goals.

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