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

Report created on Aug 11, 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 consists of four ETFs with a heavy emphasis on stocks, making up 99.46% of the allocation. The Vanguard Total Stock Market Index Fund ETF Shares dominates at 50%, providing broad exposure to the U.S. market. The Avantis U.S. Small Cap Value ETF at 20% adds a tilt towards smaller, potentially higher-growth companies. The Vanguard Total International Stock Index Fund ETF Shares and iShares MSCI EAFE ETF, at 20% and 10% respectively, enhance international diversification. This composition suggests a growth-focused strategy with broad diversification across different markets and sectors.

Growth Info

Historically, the portfolio has performed well, with an impressive CAGR of 15.07%. However, it has also experienced significant volatility, evidenced by a max drawdown of -36.89%. This indicates that while the portfolio has the potential for high returns, it is also susceptible to significant fluctuations. The fact that a small number of days account for 90% of returns highlights the importance of staying invested during volatile periods. Overall, the historical performance suggests a strong growth potential, albeit with a risk of substantial short-term losses.

Projection Info

Using a Monte-Carlo simulation with 1,000 iterations, the portfolio's future performance was assessed. This method helps in understanding the range of possible outcomes by simulating various market scenarios. The results show a median return of 375.38% and an annualized return of 14.6%, with 964 simulations yielding positive returns. While the 5th percentile projects a modest 20.29% return, the 67th percentile suggests a potential 604.56% growth. This indicates a favorable long-term outlook, but also highlights the inherent uncertainties in market predictions.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted toward stocks, with 99.46% of assets in equities. This indicates a strong growth orientation, as stocks typically offer higher returns over the long term compared to other asset classes like bonds or cash. However, this also means increased exposure to market volatility. The minimal allocation to cash and other asset classes suggests limited protection against downturns. To mitigate risk, consider diversifying into other asset classes, which could provide more stability and reduce overall portfolio volatility.

Sectors Info

  • Technology
    20%
  • Financials
    19%
  • Industrials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Telecommunications
    6%
  • Energy
    6%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio's sector allocation is diverse, with significant weights in technology (20.22%), financial services (18.77%), and industrials (13.00%). These sectors are known for their growth potential, aligning with the portfolio's growth objective. However, the concentration in these areas could increase vulnerability to sector-specific downturns. A more balanced sector allocation could enhance resilience and reduce risk. Consider evaluating sector exposures periodically to ensure alignment with market conditions and personal investment goals, potentially rebalancing to maintain desired risk levels.

Regions Info

  • North America
    71%
  • Europe Developed
    14%
  • Japan
    5%
  • Asia Emerging
    3%
  • Asia Developed
    2%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic allocation is primarily focused on North America, accounting for 70.97% of the assets, followed by Europe Developed at 14.33%. This heavy North American focus provides exposure to one of the world's most dynamic markets but may limit potential benefits from other regions. The remaining allocation is spread across various global markets, offering some diversification benefits. To further optimize, consider increasing exposure to underrepresented regions, which could capture growth opportunities in emerging markets and reduce dependency on North American market performance.

Redundant positions Info

  • Vanguard Total International Stock Index Fund ETF Shares
    iShares MSCI EAFE ETF
    High correlation

The portfolio contains highly correlated assets, notably between the Vanguard Total International Stock Index Fund ETF Shares and iShares MSCI EAFE ETF. This correlation suggests overlapping exposures that may not provide additional diversification benefits. High correlation within a portfolio can lead to increased risk during market downturns, as similar assets may move in tandem. To enhance diversification, consider reducing exposure to these correlated assets. Instead, focus on incorporating assets with lower correlations, which could offer more effective risk mitigation and portfolio stability.

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.

Before optimizing the portfolio, focus on reducing overlapping, highly correlated assets that don't provide diversification benefits. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. By shifting towards less correlated assets, the portfolio's risk-return profile can be improved. This adjustment can lead to a more efficient allocation, balancing growth potential with risk management. Consider reassessing the portfolio periodically to ensure alignment with personal investment goals and market conditions, optimizing for both risk and return.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • iShares MSCI EAFE ETF 2.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.79%

The portfolio's overall dividend yield is 1.79%, with contributions from various ETFs. The Vanguard Total International Stock Index Fund ETF Shares offers the highest yield at 3.0%, followed by the iShares MSCI EAFE ETF at 2.9%. While the yield provides some income, it is relatively modest compared to potential capital gains. Dividend-paying assets can add stability and income, particularly during volatile market periods. To increase income potential, consider incorporating additional dividend-focused investments, balancing the need for growth with income generation.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares MSCI EAFE ETF 0.33%
  • 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) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, which is relatively low and favorable for long-term growth. The Vanguard Total Stock Market Index Fund ETF Shares has the lowest cost at 0.03%, while the iShares MSCI EAFE ETF is the highest at 0.33%. Keeping costs low is crucial, as high fees can erode returns over time. This cost structure supports the portfolio's growth objectives by maximizing net returns. Regularly review expense ratios and explore opportunities to further reduce costs, ensuring more of the portfolio's returns are retained.

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