Growth-Oriented and Highly Diversified Portfolio with Strong Historical Performance and Balanced Risk for Long-Term Investors

Report created on Nov 10, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is composed of five ETFs, with a significant allocation towards US small-cap value and total stock market indices, each making up 30% of the portfolio. Developed and emerging markets are also represented, along with a 10% allocation in extended duration treasury bonds. This composition indicates a growth-oriented strategy with a robust diversification across various asset classes and geographies. Diversification is essential for reducing risk, and this portfolio's structure helps mitigate potential losses by spreading investments across different markets and sectors.

Growth Info

The historical performance of the portfolio shows a compound annual growth rate (CAGR) of 12.82%, which is impressive for a growth-oriented portfolio. The maximum drawdown of -33.18% highlights potential volatility, but the strong CAGR suggests resilience and potential for recovery. The fact that 90% of returns are concentrated in just 15 days emphasizes the importance of staying invested to capture these gains. This performance indicates that the portfolio has historically managed to provide substantial returns, making it appealing for those seeking long-term growth.

Projection Info

Using a Monte Carlo simulation with 1,000 simulations, the portfolio shows a median projected growth of 156.7%, with 67% of simulations indicating returns of 274.07%. The 5th percentile projects a loss of -39.58%, demonstrating potential downside risks. Monte Carlo simulations are a statistical method used to model the probability of different outcomes, helping investors understand potential future performance. The portfolio's annualized return across simulations is 10.0%, suggesting a positive outlook, but it's crucial to remain aware of the inherent risks associated with market fluctuations.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio's asset class allocation is heavily weighted towards stocks, accounting for approximately 89% of the total portfolio. Bonds represent nearly 10%, providing some level of stability and risk mitigation. Cash and other assets make up a minimal portion. This allocation aligns with a growth-focused strategy, as equities generally offer higher returns over the long term compared to bonds. However, the limited bond exposure could lead to increased volatility. To balance risk and reward, consider adjusting the allocation to better reflect your risk tolerance and investment goals.

Sectors Info

  • Financials
    19%
  • Technology
    16%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Energy
    7%
  • Health Care
    6%
  • Telecommunications
    5%
  • Basic Materials
    5%
  • Consumer Staples
    5%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation is well-diversified, with financial services, technology, and industrials leading the way. Consumer cyclicals and energy sectors also hold significant positions. This diversification across various sectors helps reduce sector-specific risks, as poor performance in one sector can be offset by gains in another. A diversified sector allocation is crucial for a balanced portfolio, as it can help protect against downturns in specific industries. Regularly reviewing and rebalancing sector allocations can ensure that the portfolio remains aligned with your investment objectives.

Regions Info

  • North America
    61%
  • Asia Emerging
    9%
  • Europe Developed
    8%
  • Asia Developed
    4%
  • Japan
    3%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Australasia
    1%

The geographic composition of the portfolio is primarily focused on North America, which constitutes 60.9% of the total allocation. Other regions, such as Asia, Europe, and emerging markets, are also represented, providing exposure to global growth opportunities. Geographic diversification is essential for capturing potential gains in different regions and mitigating risks associated with economic downturns in specific areas. While the current allocation offers a solid balance, consider periodically reviewing the geographic distribution to ensure it aligns with your investment strategy and risk tolerance.

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 improvement by moving along the efficient frontier. Investors can achieve a riskier or more conservative portfolio by adjusting the allocation between stocks and bonds. For those seeking higher returns, increasing equity exposure may be beneficial, while those looking for stability might consider a greater bond allocation. However, before optimizing, ensure that the current portfolio aligns with your risk tolerance and investment goals. Regularly reviewing and rebalancing the portfolio can help maintain an optimal risk-return balance over time.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.30%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 2.12%

The portfolio offers a total dividend yield of 2.12%, with contributions from various ETFs, including a notable 4.3% yield from the Vanguard Extended Duration Treasury Index Fund. Dividends provide a steady income stream and can enhance total returns, especially in volatile markets. A diversified dividend yield can also help cushion against market downturns. For investors seeking income alongside growth, maintaining a focus on dividend-paying assets can be beneficial. Consider reinvesting dividends to compound returns or using them as a source of passive income, depending on your financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

With a total expense ratio (TER) of 0.11%, the portfolio is cost-efficient, minimizing the impact of fees on overall returns. Lower costs are crucial for maximizing investment performance, as high fees can erode gains over time. The portfolio's expense ratios for individual ETFs are competitive, ensuring that more of your investment dollars are working for you. To maintain cost efficiency, regularly review and compare expense ratios across similar funds, and consider reallocating to lower-cost options if available. Keeping investment costs low is a fundamental principle for optimizing long-term returns.

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