Growth-Oriented Portfolio with High Diversification but Overlapping Correlations and Moderate Risk Exposure

Report created on Jul 2, 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 primarily of ETFs, focusing on a growth-oriented strategy with a moderate risk profile. It includes a mix of U.S., international, and emerging market funds, providing broad diversification across regions and sectors. The portfolio's largest holding is the WisdomTree 90/60 US Balanced ETF, making up 30% of the total allocation. Other significant holdings include the Avantis U.S. Small Cap Value ETF and ProShares Ultra S&P500, each at 15%. This composition suggests a strong emphasis on equities, with nearly 98% allocated to stocks, indicating a preference for capital appreciation over income generation.

Growth Info

Historically, the portfolio has shown a respectable CAGR of 8.39%, reflecting its growth-oriented nature. However, it has also experienced a maximum drawdown of -30.84%, highlighting the inherent volatility associated with its risk profile. The concentration of returns over just seven days suggests that the portfolio's performance is heavily influenced by short-term market movements. This pattern underscores the importance of maintaining a long-term perspective, as missing these critical days could significantly impact overall returns. The historical performance aligns with the portfolio's growth focus but also emphasizes the need for risk management strategies.

Projection Info

Using a Monte Carlo simulation, we projected the portfolio's future performance based on 1,000 simulations. This method provides a range of potential outcomes by simulating various market scenarios. The results indicate a median expected return of 102.74%, with a 67th percentile outcome of 189.45%. However, there's also a 5th percentile outcome showing a potential decline of -45.33%. The simulation's annualized return of 7.44% suggests a positive outlook, but the wide range of outcomes highlights the uncertainty and potential volatility. Investors should be prepared for varying results and consider their risk tolerance when evaluating these projections.

Asset classes Info

  • Stocks
    98%
  • Cash
    2%
  • Other
    1%

The portfolio is heavily skewed towards equities, with stocks comprising approximately 98% of the total allocation. This significant equity exposure aligns with the growth-oriented investment strategy but also increases the portfolio's sensitivity to market fluctuations. The remaining allocation is split between cash and other minor asset classes, offering limited diversification benefits. While the focus on equities can drive higher returns, it also introduces greater risk. To mitigate this, investors might consider incorporating more fixed-income assets to balance the equity risk and provide stability during market downturns.

Sectors Info

  • Technology
    21%
  • Financials
    19%
  • Consumer Discretionary
    13%
  • Industrials
    12%
  • Health Care
    7%
  • Telecommunications
    7%
  • Energy
    6%
  • Basic Materials
    6%
  • Consumer Staples
    6%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation within the portfolio is diverse, with significant exposure to technology, financial services, and consumer cyclicals. These sectors are known for their growth potential but can also be volatile. The portfolio's exposure to defensive sectors like healthcare and consumer defensive is relatively lower, which could impact stability during economic downturns. A well-rounded sector allocation can help manage risk and capture opportunities across different market cycles. Investors may want to monitor sector performance and consider adjusting allocations to ensure a balanced approach that aligns with their risk tolerance and market outlook.

Regions Info

  • North America
    61%
  • Europe Developed
    11%
  • Asia Emerging
    11%
  • Asia Developed
    7%
  • Japan
    6%
  • Australasia
    2%
  • Latin America
    2%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly focused on North America, with 60.92% of assets allocated there. This concentration reflects a strong bias towards the U.S. market, which can offer growth opportunities but also exposes the portfolio to regional risks. The remaining allocation is spread across developed and emerging markets in Europe, Asia, and other regions, providing some international diversification. While this geographic distribution can help capture global growth, it also introduces currency and geopolitical risks. Investors should consider whether this geographic mix aligns with their investment goals and risk appetite, potentially adjusting for more balanced global exposure.

Redundant positions Info

  • WisdomTree International Efficient Core Fund
    Avantis® International Small Cap Value ETF
    High correlation
  • Avantis® Emerging Markets Value ETF
    WisdomTree Emerging Markets Efficient Core Fund
    High correlation
  • WisdomTree 90/60 US Balanced
    ProShares Ultra S&P500
    High correlation

The portfolio exhibits high correlations among certain assets, particularly within the WisdomTree and Avantis funds. These correlations suggest that these assets tend to move in tandem, reducing the diversification benefits. While some correlation is expected, excessive overlap can increase risk without providing additional return potential. Investors should consider evaluating the correlation structure and potentially replacing highly correlated assets with alternatives that offer better diversification. This approach can help optimize the portfolio's risk-return profile by minimizing unnecessary overlap and enhancing resilience against market fluctuations.

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 assets that don't enhance diversification. By addressing these correlations, investors can improve the portfolio's efficiency and risk-return profile. Moving along the efficient frontier allows for adjustments towards riskier or more conservative allocations. To increase risk, consider allocating more to equities, while reducing equity exposure can create a more conservative stance. This approach ensures the portfolio aligns with investment goals and risk tolerance. Optimizing the portfolio is a continuous process, requiring regular reviews to adapt to changing market conditions and personal financial objectives.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® Emerging Markets Value ETF 3.70%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • WisdomTree Emerging Markets Efficient Core Fund 2.30%
  • WisdomTree International Efficient Core Fund 2.60%
  • WisdomTree 90/60 US Balanced 1.00%
  • ProShares Ultra S&P500 0.70%
  • Weighted yield (per year) 1.80%

The portfolio's dividend yield is modest, at 1.8%, reflecting its emphasis on growth over income. While some individual ETFs, like the Avantis Emerging Markets Value ETF, offer higher yields, the overall yield is relatively low. This suggests that the portfolio is designed for capital appreciation rather than generating regular income. Investors seeking income may need to reevaluate their holdings or consider adding dividend-focused investments to enhance cash flow. Balancing growth and income can provide a more stable investment experience and support financial goals, especially for those nearing retirement or seeking passive income.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • WisdomTree Emerging Markets Efficient Core Fund 0.32%
  • WisdomTree International Efficient Core Fund 0.26%
  • WisdomTree 90/60 US Balanced 0.20%
  • ProShares Ultra S&P500 0.91%
  • Weighted costs total (per year) 0.36%

The portfolio's total expense ratio stands at 0.36%, which is reasonable for a diversified ETF portfolio. The ProShares Ultra S&P500 has the highest individual expense ratio at 0.91%, which could impact overall returns. Keeping investment costs low is crucial for maximizing net returns over time. Investors should regularly review expense ratios and seek cost-effective options without compromising on quality or diversification. By minimizing costs, investors can enhance their portfolio's performance, allowing more of the investment returns to compound over the long term. This approach aligns with sound investment principles and supports achieving financial objectives efficiently.

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