Balanced portfolio with strong US focus and moderate risk exposure

Report created on Feb 4, 2025

Risk profile Info

4/7
Balanced
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 significant allocation to the Vanguard S&P 500 ETF at 50%, followed by the Dimensional World ex U.S. Core Equity 2 ETF at 30%, and the Avantis U.S. Small Cap Value ETF at 20%. This structure leans heavily on U.S. equities while maintaining some international exposure. The balance between large-cap and small-cap equities provides a mix of stability and growth potential. However, the lack of bonds or alternative assets might limit defensive capabilities during market downturns. Consider introducing a small allocation to fixed income to enhance diversification and reduce volatility.

Growth Info

Historically, the portfolio has delivered a Compound Annual Growth Rate (CAGR) of 8.92%, which is competitive compared to broad market indices. The maximum drawdown of -23.70% indicates potential for significant short-term losses, which aligns with its balanced risk classification. Understanding past performance helps set realistic expectations, but it's important to remember that historical returns are not guaranteed to repeat. Continuously monitoring economic conditions and adjusting the allocation can help manage future risks and returns.

Projection Info

Using Monte Carlo simulations, which run numerous hypothetical scenarios using historical data, the portfolio shows a median potential return of 168.7% over the projection period. While 918 out of 1,000 simulations result in positive returns, there's a 5% chance of a -15.2% loss. The simulations illustrate the range of possible outcomes, emphasizing that future returns can vary widely. This tool is useful for setting expectations, but it cannot predict exact future performance. Regularly revisiting the portfolio's strategy and risk tolerance is advisable.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is 100% in stocks, which provides high growth potential but also exposes it to equity market volatility. The absence of fixed income or alternative investments may increase risk during market downturns. While equities can offer significant returns, diversification across asset classes can help mitigate risks. Consider adding bonds or other asset classes to balance growth and stability, especially if nearing a financial goal or anticipating market turbulence.

Sectors Info

  • Technology
    21%
  • Financials
    18%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    8%
  • Energy
    7%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Basic Materials
    5%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is relatively balanced, with a notable concentration in Technology (21%) and Financial Services (18%). This composition aligns closely with common benchmarks, offering a mix of growth and value sectors. However, the technology sector's volatility can impact overall portfolio performance during economic shifts. Diversifying further across underrepresented sectors like Utilities or Real Estate might enhance stability. Regularly reviewing sector performance and trends can help maintain a balanced risk profile.

Regions Info

  • North America
    71%
  • Europe Developed
    12%
  • Asia Emerging
    5%
  • Japan
    5%
  • Asia Developed
    4%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio predominantly focuses on North America (71%), with limited exposure to other regions. While this aligns with the dominance of U.S. equities in global markets, it may limit diversification benefits. Global diversification can reduce region-specific risks and capture growth in emerging markets. Consider increasing allocations to underrepresented regions like Asia or Europe to enhance international diversification. Monitoring geopolitical developments can further inform geographic allocation decisions.

Market capitalization Info

  • Mega-cap
    31%
  • Large-cap
    27%
  • Mid-cap
    18%
  • Small-cap
    13%
  • Micro-cap
    10%

The portfolio's market capitalization is diversified, with a mix of Mega (31%), Big (27%), Medium (18%), Small (13%), and Micro (10%) caps. This distribution provides exposure to both established companies and growth opportunities in smaller firms. Investing across various market caps can help balance stability and growth potential. However, small and micro-cap stocks can be more volatile. Consider adjusting the market cap allocation based on market conditions and risk tolerance to optimize performance.

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 using the Efficient Frontier, which identifies the best possible risk-return ratio based on current assets. This approach helps in achieving maximum returns for a given level of risk. However, optimization doesn't guarantee diversification or alignment with personal goals. Consider adjusting allocations among existing assets to improve efficiency, but ensure these changes align with broader investment objectives and risk tolerance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Dimensional World ex U.S. Core Equity 2 ETF 2.00%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.52%

The portfolio's dividend yield stands at 1.52%, with contributions from all three ETFs. Dividends provide a steady income stream and can enhance total returns, especially in volatile markets. However, the yield is relatively modest, reflecting the portfolio's growth-oriented nature. For investors seeking higher income, increasing exposure to dividend-focused securities could be beneficial. Balancing between growth and income can help meet both short- and long-term financial goals.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Dimensional World ex U.S. Core Equity 2 ETF 0.28%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.15%

The portfolio's total expense ratio (TER) is 0.15%, which is impressively low. This cost efficiency supports better long-term performance, as lower fees mean more of the investment returns stay in your pocket. The Vanguard S&P 500 ETF's TER of 0.03% is particularly noteworthy for its cost-effectiveness. Continuously monitoring and minimizing investment costs is crucial, as even small differences in fees can compound over time, significantly impacting overall returns.

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