A growth-focused portfolio with a strong domestic bias and moderate sector diversification

Report created on Dec 24, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with 99.5% in stock assets, primarily through three ETFs. The Vanguard S&P 500 ETF makes up 50% of the portfolio, emphasizing large-cap U.S. stocks. The Vanguard Small-Cap Value Index Fund ETF adds 27%, focusing on smaller U.S. companies. The Vanguard Total World Stock Index Fund ETF contributes 23%, providing global exposure. Compared to a typical growth portfolio, this composition is heavily skewed towards U.S. equities, which could limit international diversification benefits. To enhance diversification, consider increasing exposure to other asset classes, such as bonds or real estate.

Growth Info

Historically, the portfolio has delivered a robust Compound Annual Growth Rate (CAGR) of 12.19%, outperforming many benchmarks. However, it experienced a significant maximum drawdown of -36.5%, indicating potential vulnerability during market downturns. The fact that 90% of returns were generated on just 27 days suggests high volatility. While past performance is not indicative of future results, this history highlights the portfolio's potential for strong returns, albeit with considerable risk. To mitigate future drawdowns, consider diversifying into less volatile assets.

Projection Info

Monte Carlo simulations, which use historical data to predict future outcomes, indicate a wide range of potential returns for this portfolio. With 1,000 simulations, the 5th percentile shows a 25.95% return, while the 67th percentile projects a 475.05% return. The median outcome is 318.97%, with an annualized return of 12.5%. While these simulations provide a useful forecast, they are based on historical data and assumptions, which may not hold in the future. To prepare for varying outcomes, ensure your investment strategy is flexible and adaptable to changing market conditions.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is almost entirely composed of stocks, with a negligible allocation to cash and other assets. This heavy concentration in equities suggests a focus on capital appreciation, but it also increases exposure to market volatility. A more balanced allocation across asset classes, such as including bonds or alternative investments, could help mitigate risks and provide steadier returns. Comparing to benchmarks, this portfolio's equity weighting is quite aggressive, typical for a growth-oriented strategy but lacking in diversification.

Sectors Info

  • Technology
    24%
  • Financials
    16%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Real Estate
    4%
  • Energy
    4%
  • Basic Materials
    4%
  • Utilities
    3%

Sector allocation is fairly balanced, with technology leading at 24.2%, followed by financial services and industrials. This distribution aligns well with global benchmarks, offering exposure to key growth sectors. However, the high concentration in technology may increase volatility, especially during market corrections. Consider diversifying further into sectors like healthcare or consumer defensives to cushion against sector-specific downturns. Maintaining a balanced sector allocation can help stabilize returns over the long term.

Regions Info

  • North America
    91%
  • Europe Developed
    4%
  • Asia Emerging
    1%
  • Japan
    1%
  • Asia Developed
    1%

The portfolio is heavily concentrated in North America, representing 91.3% of geographic allocation. This strong domestic bias limits exposure to international markets, which could offer diversification benefits and growth opportunities. Compared to global benchmarks, this allocation underrepresents regions like Europe and Asia. To enhance geographic diversification, consider increasing investments in international markets, which can help mitigate regional risks and capitalize on global growth trends.

Redundant positions Info

  • Vanguard S&P 500 ETF
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio features highly correlated assets, particularly between the Vanguard S&P 500 ETF and the Vanguard Total World Stock Index Fund ETF. High correlation means these assets tend to move in tandem, reducing diversification benefits. In times of market stress, this could lead to amplified losses. To improve diversification, consider reducing allocation to overlapping assets and exploring investments with lower correlation to the existing holdings. This approach can help manage risk and enhance portfolio resilience.

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 could benefit from optimization using the Efficient Frontier, which seeks the best possible risk-return ratio. However, the current high correlation between assets suggests limited diversification. Before optimizing, focus on reducing overlap and enhancing diversification. This process involves reallocating investments to achieve a more balanced risk-return profile. Remember, optimization is about maximizing returns for a given level of risk, not necessarily achieving diversification.

Dividends Info

  • Vanguard Small-Cap Value Index Fund ETF Shares 1.40%
  • Vanguard S&P 500 ETF 0.90%
  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.26%

The portfolio's dividend yield stands at 1.26%, with contributions from all three ETFs. While not a primary focus for a growth-oriented portfolio, dividends can provide a steady income stream and help cushion against market volatility. Compared to income-focused portfolios, this yield is modest but aligns well with a growth strategy. For those seeking higher income, consider reallocating a portion of the portfolio to dividend-focused investments, balancing growth with income generation.

Ongoing product costs Info

  • Vanguard Small-Cap Value Index Fund ETF Shares 0.07%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.05%

The portfolio boasts impressively low costs, with a Total Expense Ratio (TER) of just 0.05%. This low cost structure supports better long-term performance by minimizing the drag on returns. Compared to industry averages, these costs are highly competitive, making it an efficient choice for cost-conscious investors. Maintaining low costs is crucial for maximizing returns over time, so continue monitoring expenses and consider replacing any high-fee investments with more cost-effective options if they arise.

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