Growth-Oriented Portfolio with Strong Diversification and Moderate Risk for US-Based Investor

Report created on Dec 5, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio comprises four ETFs with a strong emphasis on equities, demonstrating a growth-oriented strategy. The largest allocation is in the SPDR® Portfolio S&P 500 ETF, making up 40% of the portfolio, providing broad exposure to large-cap US stocks. Additionally, there's a significant allocation to international equities through the Vanguard FTSE Developed Markets ETF and Vanguard FTSE Emerging Markets ETF, collectively accounting for 40%. The Avantis® U.S. Small Cap Value ETF adds a value tilt and small-cap exposure. This diversified mix aims to balance growth potential with risk by spreading investments across various markets and sectors.

Growth Info

Historically, this portfolio has shown impressive performance, with a compound annual growth rate (CAGR) of 14.47%. This indicates strong growth over time, but it's important to note the maximum drawdown of -36.64%, highlighting potential volatility. The portfolio's returns are concentrated, with just 15 days accounting for 90% of gains, suggesting occasional large market movements can significantly impact performance. This historical data underscores the potential for substantial growth, albeit with periods of heightened risk, making it suitable for investors who can tolerate market fluctuations for the prospect of higher returns.

Projection Info

Using a Monte Carlo simulation, which models potential future outcomes based on historical data, this portfolio shows a wide range of possible returns. With 1,000 simulations, the median outcome suggests a potential growth of 377.65%, while the 5th percentile indicates a more conservative growth of 11.44%. Impressively, 961 simulations resulted in positive returns, reflecting the portfolio's strong potential for future gains. The annualized return across simulations is 14.48%, aligning with historical performance. This scenario analysis emphasizes the importance of understanding potential outcomes and maintaining a long-term perspective when investing.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising over 99% of the total allocation, with minimal exposure to cash and other assets. This high equity concentration aligns with a growth-oriented strategy, aiming to maximize returns through market appreciation. While stocks offer significant growth potential, this allocation also involves higher risk, as equities can be volatile. Investors should be comfortable with this risk profile and consider whether their financial goals and risk tolerance align with such an equity-heavy approach. Balancing with other asset classes could reduce risk but may also dampen potential returns.

Sectors Info

  • Technology
    20%
  • Financials
    20%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    8%
  • Energy
    6%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is well-diversified across major industries, with significant exposure to Technology, Financial Services, and Industrials. Technology leads with 19.62%, reflecting its prominence in the market. This diversification helps mitigate sector-specific risks, as poor performance in one area may be offset by gains in others. Such a spread can enhance stability and provide opportunities for growth across various economic conditions. For investors, maintaining this broad sector exposure is beneficial, but periodic reviews are advisable to ensure alignment with market trends and personal investment objectives.

Regions Info

  • North America
    63%
  • Europe Developed
    16%
  • Japan
    6%
  • Asia Emerging
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, accounting for 62.68% of the allocation, providing strong exposure to the US market. The remaining allocation spans developed and emerging markets, including Europe, Japan, and Asia. This geographic diversification helps reduce risks associated with economic and political shifts in any single region. For investors, this global exposure can offer growth opportunities and stability by tapping into different economic cycles. However, it's crucial to regularly assess geopolitical developments and economic indicators that could impact these regions.

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 potential for further refinement by adjusting asset weights along the efficient frontier. Moving towards a riskier portfolio could involve increasing exposure to higher volatility assets, while a more conservative approach might include adding bonds or cash. However, given the current strong diversification and growth orientation, immediate optimization may not be necessary. Instead, focus on maintaining alignment with risk tolerance and investment objectives. Regularly review portfolio performance and market conditions to identify opportunities for gradual adjustments that enhance returns while managing risk effectively.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • SPDR® Portfolio S&P 500 ETF 1.20%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 1.94%

The portfolio offers a modest dividend yield of 1.94%, with contributions from all holdings. The Vanguard FTSE Developed Markets ETF provides the highest yield at 3.0%, while the SPDR® Portfolio S&P 500 ETF delivers 1.2%. Dividends can provide a steady income stream and help cushion against market volatility. For investors seeking growth, reinvesting dividends can enhance compounding returns over time. However, those looking for income may find the yield relatively low compared to fixed-income investments. Balancing growth and income needs is key to aligning the portfolio with financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • SPDR® Portfolio S&P 500 ETF 0.02%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is relatively low at 0.08%, indicating cost-effective management. The SPDR® Portfolio S&P 500 ETF contributes the lowest cost at 0.02%, while the Avantis® U.S. Small Cap Value ETF is the highest at 0.25%. Keeping costs low is crucial for maximizing net returns, as high fees can erode investment gains over time. Investors should continue to monitor these expenses and consider low-cost options when making adjustments. Maintaining a focus on minimizing costs while achieving desired exposure can enhance overall portfolio performance.

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