A growth-focused portfolio with strong U.S. equity presence and low costs
Report created on Apr 27, 2025Risk profile
5/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 80.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 20.00%
The portfolio is composed of two main ETFs, with 80% in the Vanguard Total Stock Market Index Fund ETF and 20% in the Vanguard Total International Stock Index Fund ETF. This composition leans heavily towards U.S. equities, providing broad exposure across the U.S. market, while also incorporating a smaller portion of international equities. This structure aligns with a growth-focused strategy, emphasizing potential capital appreciation. While this mix offers a solid foundation, consider rebalancing periodically to maintain the intended risk profile and diversification.
Growth
Historically, this portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 11.42%. This outpaces many benchmarks, indicating robust performance. However, the maximum drawdown of -34.76% highlights the potential for significant losses during market downturns. It's crucial to remember that past performance doesn't guarantee future results. Investors should be prepared for volatility and consider their ability to withstand such drawdowns when evaluating long-term investment strategies.
Projection
The Monte Carlo simulation, which uses historical data to forecast potential future outcomes, suggests a wide range of potential returns. With 1,000 simulations, the portfolio's annualized return is projected at 9.89%. The 5th percentile outcome indicates a modest return, while the 67th percentile shows substantial growth. Although simulations provide insights, they are not predictions. Investors should use these projections as one of many tools to guide their decisions, always considering the inherent uncertainties of market conditions.
Asset classes
- Stocks 99%
- Cash 1%
This portfolio is heavily weighted towards stocks, with 99% allocation, and a minimal 1% in cash. Such a concentration in equities aligns with a growth-oriented approach, aiming for higher returns. However, it also increases exposure to market volatility. Compared to benchmarks, this allocation lacks fixed-income assets, which could provide stability during downturns. Investors may want to explore diversifying into other asset classes to reduce risk and potentially smooth returns over time.
Sectors
- Technology 27%
- Financials 16%
- Consumer Discretionary 11%
- Health Care 11%
- Industrials 10%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 4%
- Basic Materials 3%
- Real Estate 3%
- Utilities 3%
The portfolio's sector allocation is dominated by technology at 27%, followed by financial services and consumer cyclicals. This tech-heavy focus can drive growth, especially in innovative markets, but also introduces higher volatility, particularly during economic shifts or interest rate changes. The presence of 11 sectors indicates diversification, yet the concentration in a few sectors may lead to increased risk. Balancing sector weights could enhance stability and align more closely with global benchmarks.
Regions
- North America 81%
- Europe Developed 8%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily skewed towards North America, with 81% exposure, primarily due to the U.S. focus. While this can capitalize on the U.S. market's historical strength, it also increases vulnerability to regional economic downturns. The remaining 19% is distributed across developed and emerging markets, offering some diversification. Investors might consider increasing international exposure, particularly in emerging markets, to mitigate regional risks and capitalize on global growth opportunities.
Market capitalization
- Mega-cap 42%
- Large-cap 30%
- Mid-cap 19%
- Small-cap 6%
- Micro-cap 2%
The portfolio's market capitalization is predominantly in mega and big-cap stocks, accounting for 72%. This focus on large companies offers stability and reliable performance, often with established market positions. However, the smaller allocation to medium, small, and micro-cap stocks suggests limited exposure to potentially higher growth opportunities. Diversifying across market caps could enhance the portfolio's growth potential, albeit with increased volatility, aligning with a growth-oriented strategy.
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's current structure may benefit from optimization using the Efficient Frontier, a concept that identifies the best possible risk-return ratio. With its current assets, adjustments in allocation could enhance efficiency, potentially improving returns without increasing risk. This doesn't necessarily imply diversification but focuses on optimizing within existing holdings. Investors should periodically review and adjust allocations to ensure alignment with their risk tolerance and investment goals.
Dividends
- Vanguard Total Stock Market Index Fund ETF Shares 1.40%
- Vanguard Total International Stock Index Fund ETF Shares 3.10%
- Weighted yield (per year) 1.74%
The portfolio's dividend yield stands at 1.74%, with the international ETF contributing a higher yield than its U.S. counterpart. While growth-focused portfolios typically prioritize capital appreciation, dividends can provide a steady income stream and help cushion against market volatility. Investors who value income generation might consider increasing exposure to high-dividend sectors or funds, balancing growth with income potential, especially in a low-interest-rate environment.
Ongoing product costs
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Vanguard Total International Stock Index Fund ETF Shares 0.05%
- Weighted costs total (per year) 0.03%
The portfolio benefits from impressively low total expense ratios (TERs), with the Vanguard Total Stock Market Index Fund ETF at 0.03% and the international ETF at 0.05%. These costs are well below industry averages, enhancing long-term returns by minimizing the drag on performance. Keeping costs low is a key component of successful investing. Investors are on the right track here, and maintaining this focus on low-cost funds will continue to support the portfolio's growth potential.
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