A growth-focused US-centric portfolio with low diversification and high small-cap exposure

Report created on Jan 9, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio consists of four ETFs, each holding a 25% allocation. It is primarily composed of U.S. equities, with a significant focus on small-cap and value stocks. Compared to common benchmarks, this portfolio lacks diversification across asset classes and regions, concentrating heavily in U.S. markets. A diversified portfolio typically includes a mix of stocks, bonds, and international exposure to spread risk. To enhance diversification, consider incorporating assets from different classes or regions, which can help reduce risk and improve stability over time.

Growth Info

Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.89%. However, it also experienced a significant maximum drawdown of -44.51%, indicating high volatility. Comparing this to benchmark indices, the portfolio's high returns come with increased risk. While past performance is not indicative of future results, it highlights the potential for both gains and losses. To mitigate risk, consider blending this high-growth strategy with more stable investments to cushion against market downturns.

Projection Info

Forward projections using Monte Carlo simulations suggest a wide range of outcomes, with a median expected return of 431.56% over the investment horizon. Monte Carlo simulations use historical data to model potential future performance, but they cannot predict exact outcomes. The 5th percentile shows a possible loss, emphasizing the portfolio's risk. Diversifying further or adjusting asset weightings could help manage potential downside risks. Remember, simulations are based on past data and assumptions, which may not hold in the future.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with over 99% in equities and a negligible cash position. This concentration in a single asset class increases exposure to market volatility. A more balanced allocation might include bonds or alternative investments, which typically provide lower returns but can reduce overall portfolio risk. Diversifying across asset classes can help stabilize returns and protect against market fluctuations, aligning with a more conservative investment approach if desired.

Sectors Info

  • Financials
    20%
  • Consumer Discretionary
    15%
  • Industrials
    13%
  • Technology
    12%
  • Health Care
    10%
  • Energy
    8%
  • Consumer Staples
    7%
  • Basic Materials
    5%
  • Telecommunications
    5%
  • Real Estate
    3%
  • Utilities
    2%

Sector allocation shows a concentration in Financial Services and Consumer Cyclicals, making up over a third of the portfolio. Such concentration can lead to higher volatility, especially if these sectors face economic challenges. A diversified sector allocation can mitigate sector-specific risks. Consider redistributing some investments into underrepresented sectors to achieve a more balanced sector exposure, which can provide stability and capitalize on different economic cycles.

Regions Info

  • North America
    99%
  • Latin America
    1%
  • Europe Developed
    1%

With nearly 99% of the portfolio allocated to North America, geographic diversification is minimal. This lack of international exposure can limit growth opportunities and increase vulnerability to regional economic downturns. A globally diversified portfolio often includes a mix of developed and emerging markets, which can offer growth potential and risk reduction. Consider incorporating international equities to enhance diversification and tap into global economic trends.

Redundant positions Info

  • iShares Core S&P Small-Cap ETF
    Avantis® U.S. Small Cap Value ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the iShares Core S&P Small-Cap ETF and Avantis® U.S. Small Cap Value ETF. High correlation means these assets tend to move together, reducing diversification benefits. In times of market stress, this can lead to larger losses. To improve diversification, consider replacing one of these ETFs with a less correlated asset, which can help manage risk and improve the portfolio's resilience to market changes.

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 be optimized further using the Efficient Frontier, which seeks the best possible risk-return ratio. Currently, the portfolio's expected return is slightly below the optimal level. By adjusting allocations, it's possible to achieve a higher expected return without increasing risk. This involves rebalancing toward assets that contribute more efficiently to the portfolio's overall risk-return profile. Remember, optimization focuses on current assets and does not guarantee future performance.

Dividends Info

  • Avantis® U.S. Equity ETF 0.90%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • iShares Core S&P Small-Cap ETF 2.00%
  • Invesco S&P 500® Pure Value ETF 1.60%
  • Weighted yield (per year) 1.52%

With a total dividend yield of 1.52%, this portfolio provides moderate income from dividends. Dividend-paying stocks can offer a steady income stream and potential tax benefits. However, given the portfolio's growth focus, dividend income is secondary to capital appreciation. If income generation is a goal, consider increasing allocations to higher-yielding assets. Balancing growth and income can provide a more consistent return profile, especially in volatile markets.

Ongoing product costs Info

  • Avantis® U.S. Equity ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • iShares Core S&P Small-Cap ETF 0.06%
  • Invesco S&P 500® Pure Value ETF 0.35%
  • Weighted costs total (per year) 0.20%

The portfolio's Total Expense Ratio (TER) is 0.2%, which is relatively low and beneficial for long-term performance. Lower costs mean more of your returns stay in your pocket. High fees can erode returns over time, so maintaining low costs is advantageous. Regularly reviewing and comparing fees across similar investment options can ensure continued cost efficiency. Consider if any high-fee assets can be replaced with lower-cost alternatives without sacrificing performance.

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