Growth-Oriented Broadly Diversified Portfolio with Strong Historical Performance and High Risk Tolerance

Report created on Jul 1, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of three main ETFs, with a significant allocation towards the Vanguard Total Stock Market Index Fund ETF Shares at 60%. This is followed by the Avantis® U.S. Small Cap Value ETF, which makes up 25% of the portfolio, and the Vanguard Total International Stock Index Fund ETF Shares at 15%. With a strong focus on equities, the portfolio is predominantly invested in stocks, indicating a growth-oriented strategy. The current composition reflects a preference for broad market exposure, both domestically and internationally, which can be beneficial for capturing global growth opportunities.

Growth Info

Historically, the portfolio has delivered impressive performance with a compound annual growth rate (CAGR) of 16.4%. However, it has experienced a maximum drawdown of -37.49%, highlighting its vulnerability to market downturns. The portfolio's returns are concentrated, with just 16 days accounting for 90% of the returns, indicating a reliance on short periods of high performance. This historical performance suggests that while the portfolio has the potential for high returns, it also carries a significant level of risk, which might not be suitable for all investors.

Projection Info

The Monte Carlo simulation, a method used to model possible future outcomes, suggests a wide range of potential future performance for the portfolio. With a hypothetical initial investment, the simulation indicates that there is a high probability of achieving positive returns, with 979 out of 1,000 simulations showing gains. The median expected return is 462.73%, and the annualized return across all simulations is 16.23%. This forward projection reinforces the portfolio's growth potential, but also underscores the importance of being prepared for variability in returns.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with an allocation of over 99%, and minimal exposure to cash and other asset classes. This high concentration in equities aligns with a growth-focused investment strategy, aiming to maximize returns over the long term. However, such a concentration also increases the portfolio's sensitivity to market fluctuations. For investors seeking to manage risk, it might be beneficial to consider adding other asset classes, such as bonds, to create a more balanced portfolio that can withstand market volatility.

Sectors Info

  • Technology
    22%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Energy
    6%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is diverse, with technology and financial services being the largest sectors, comprising over 40% of the portfolio. This sector diversification can help mitigate risks associated with downturns in specific industries. However, the high allocation to technology may expose the portfolio to volatility, given the sector's tendency for rapid fluctuations. To enhance stability, it might be advantageous to periodically review and adjust sector weights to ensure they align with the investor's risk tolerance and market conditions.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with 85.352% of assets allocated there. This concentration reflects a strong bias towards the U.S. market, which can be beneficial given its historical performance and economic stability. However, it also limits exposure to growth opportunities in other regions. By diversifying more globally, the portfolio could potentially benefit from emerging market growth and reduce regional risk. Investors may consider gradually increasing allocations to underrepresented regions to achieve a more balanced geographic exposure.

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 close to the efficient frontier, indicating it is efficient in terms of risk versus return. However, it is not the optimal portfolio, as there is a potential for higher expected returns with a different risk level. To optimize, the investor could consider adjusting their risk tolerance and exploring ways to shift along the efficient frontier. This could involve reallocating assets to achieve a more conservative or riskier profile, depending on personal preferences and financial goals. The focus should be on aligning the portfolio with the investor's risk appetite.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.60%

The portfolio's dividend yield is modest at 1.6%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield of 3.0%. This yield provides a small income stream, which can be reinvested to enhance returns over time. While dividends are not the primary focus of this growth-oriented portfolio, they do offer some level of income stability. Investors who prioritize income might consider increasing exposure to higher-yielding assets, but should balance this with the potential impact on growth potential.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.09%

With a total expense ratio of 0.09%, the portfolio is cost-efficient, benefiting from low management fees across its ETF holdings. This low-cost structure is advantageous, as it helps maximize net returns by minimizing the drag of fees on performance. Keeping investment costs low is a key principle for long-term success, and this portfolio effectively adheres to that principle. Investors should continue to monitor expense ratios to ensure they remain competitive, as lower costs can significantly impact overall investment returns over time.

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