Balanced Growth Portfolio with Strong Diversification and Moderate Risk for Long-Term Gains

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 three ETFs, with a dominant 60% allocation to the Vanguard S&P 500 ETF, complemented by 20% each in Avantis® U.S. Small Cap Value ETF and Vanguard Total International Stock Index Fund ETF Shares. This composition reflects a strong emphasis on U.S. equities with a significant portion dedicated to international markets. Such a structure provides a well-rounded exposure to both large-cap U.S. stocks and international equities, aiming for growth. Consider diversifying further into different asset classes like bonds to balance the equity-heavy portfolio and potentially reduce overall risk.

Growth Info

Historically, the portfolio has shown an impressive CAGR of 16.21%, indicating robust growth over time. However, it has faced a maximum drawdown of -36.31%, pointing to significant volatility during market downturns. This performance suggests a high growth potential but also a higher risk level. To mitigate the impact of such drawdowns, consider incorporating more defensive assets or increasing cash reserves. This could provide a cushion during market volatility, ensuring a smoother ride through market fluctuations.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a promising outlook. With an annualized return of 16.84%, the simulation suggests potential for substantial growth. The median projection indicates a 541.29% increase, while even the lower 5th percentile shows a positive return of 57.38%. Monte Carlo simulations provide a probabilistic view of future performance, highlighting the range of possible outcomes. While the projections are optimistic, it's crucial to remain mindful of market uncertainties and periodically reassess the portfolio's risk exposure.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with 99.62% allocated to equities and a negligible portion in cash and other assets. This high equity concentration aligns with a growth-oriented strategy, aiming for capital appreciation. However, such a skewed allocation may expose the portfolio to heightened volatility. To enhance stability, consider introducing fixed-income securities or other asset classes. This could help in achieving a more balanced risk-return profile, especially during market downturns when equities may underperform.

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%

Sector-wise, the portfolio is broadly diversified across 11 sectors, with significant exposure to Technology, Financial Services, and Consumer Cyclicals. This sector distribution ensures participation in various economic cycles, potentially smoothing returns over time. However, the high concentration in Technology may pose risks if the sector faces downturns. To mitigate sector-specific risks, consider periodically reviewing the sector allocation and adjusting it to align with evolving market conditions and personal risk tolerance.

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, comprising 80.77% of the allocation. This reflects a strong home bias, common among investors seeking stability and familiarity. While this provides exposure to the resilient U.S. market, it may limit potential gains from emerging markets. To capitalize on global growth opportunities, consider increasing allocations to underrepresented regions. This could enhance diversification and potentially boost returns by tapping into different economic growth trajectories worldwide.

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 is well-diversified but remains heavily equity-focused, aligning with a growth strategy. To optimize, consider adjusting along the efficient frontier, balancing risk and return. Moving towards more conservative allocations could involve increasing fixed-income exposure, reducing volatility. Conversely, for more aggressive growth, further equity diversification or leveraging could be explored. Before optimizing, ensure the portfolio aligns with financial goals and risk tolerance. A thorough review of current allocations and performance metrics can guide this process effectively.

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 3.00%
  • Weighted yield (per year) 1.62%

The portfolio offers a modest dividend yield of 1.62%, with contributions from each ETF. The Vanguard Total International Stock Index Fund ETF Shares provides the highest yield at 3.0%, adding an income component to the growth-focused portfolio. Dividends can serve as a steady income stream, complementing capital gains. To enhance income potential, consider exploring dividend-focused investments or increasing allocations to higher-yielding assets. This could provide a more balanced approach, combining growth with regular income.

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 management. This is mainly due to the Vanguard S&P 500 ETF's minimal fee of 0.03%. Lower costs enhance net returns, a crucial factor in long-term investing. Keeping expenses in check is essential for maximizing returns. To maintain cost efficiency, regularly review the expense ratios of holdings and consider lower-cost alternatives if any fees increase. This vigilance can help in preserving more of the portfolio's gains over time.

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