A growth-focused portfolio with strong US equity concentration and moderate risk exposure

Report created on Dec 29, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio is heavily weighted towards US equities, with 50% in the Vanguard S&P 500 ETF and 40% in the Invesco NASDAQ 100 ETF. The remaining 10% is allocated to the Avantis U.S. Small Cap Value ETF. Such a composition is typical for a growth-focused strategy, emphasizing large-cap and tech-heavy stocks. While this can lead to significant growth during bull markets, it lacks diversification across asset classes, which could increase vulnerability during downturns. To enhance stability, consider adding more diversified asset types like bonds or international equities.

Growth Info

Historically, the portfolio has performed well with a Compound Annual Growth Rate (CAGR) of 16.66%. This indicates strong growth potential, especially during favorable market conditions. However, the maximum drawdown of -26.9% suggests vulnerability to market volatility. Comparing this to broader market indices, the portfolio has likely outperformed during bullish phases but may struggle during corrections. It's crucial to remember that past performance doesn't guarantee future results; maintaining vigilance and periodically reassessing the portfolio's risk exposure is advisable.

Projection Info

Using Monte Carlo simulations, which model potential future performance based on historical data, the portfolio shows promising outcomes. With a 50th percentile projection of 852.16% and a high probability of positive returns, the growth outlook is optimistic. However, simulations are not foolproof, as they rely on historical trends that may not repeat. While the expected annualized return is 19.43%, it's important to recognize that unexpected market shifts could alter these projections. Regularly reviewing and adjusting the portfolio in response to market changes can help manage risk.

Asset classes Info

  • Stocks
    100%

The portfolio is almost exclusively invested in stocks, with a negligible cash position. This heavy stock allocation can drive significant growth but also introduces higher volatility. Compared to a more balanced asset allocation, this portfolio might be less resilient during market downturns. To mitigate risk, consider diversifying into other asset classes, such as bonds or real estate, which can provide stability and reduce overall portfolio risk. Balancing growth with stability can lead to more consistent long-term performance.

Sectors Info

  • Technology
    38%
  • Consumer Discretionary
    13%
  • Telecommunications
    11%
  • Financials
    10%
  • Health Care
    8%
  • Industrials
    7%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

The portfolio has a notable concentration in the technology sector, comprising 37.5% of total assets. While tech stocks have driven substantial returns in recent years, they also come with heightened volatility, especially during interest rate hikes. The portfolio is relatively balanced across other sectors like consumer cyclicals and financial services, but the heavy tech weighting could pose risks if the sector underperforms. To reduce sector-specific risk, consider diversifying into sectors with less representation, such as utilities or real estate, which can offer stability.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, with minimal exposure to other regions. This concentration can enhance returns if the US market performs well but may increase risk due to lack of diversification. Global diversification can reduce country-specific risks and capture growth opportunities in emerging markets. Consider reallocating a portion of the portfolio to international equities, which can provide exposure to different economic cycles and potentially enhance long-term growth.

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 can be optimized for a better risk-return ratio using the Efficient Frontier, a concept that plots optimal portfolios offering the highest expected return for a given level of risk. While the current portfolio is already performing well, exploring slight adjustments in asset allocation could enhance returns without increasing risk. It's important to note that efficiency here refers to optimizing the current assets rather than diversifying further. Regularly reviewing the portfolio for potential optimization opportunities can ensure it remains aligned with financial goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.00%

The portfolio's average dividend yield is 1.0%, with varying contributions from each ETF. While growth-focused portfolios typically prioritize capital appreciation over income, dividends can provide a steady income stream and contribute to total returns. For investors seeking income, increasing exposure to higher-dividend stocks or funds might be beneficial. However, if capital growth remains the primary goal, maintaining a focus on growth-oriented equities is appropriate, as long as the income component aligns with financial objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.10%

The portfolio's average Total Expense Ratio (TER) is 0.1%, which is impressively low and supports better long-term performance by minimizing costs. Low fees are beneficial as they allow more of the portfolio's returns to compound over time. This cost efficiency aligns well with best practices in portfolio management. Maintaining a focus on low-cost investments can significantly enhance net returns. Continue monitoring expense ratios and consider replacing higher-cost funds with more affordable alternatives if necessary.

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