Balanced Diversified Portfolio with Strong Historic Performance and Moderate Risk Suitable for Long-Term Growth

Report created on Dec 4, 2024

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 equally split among four ETFs, each contributing 25%. It includes two U.S. focused ETFs and two international ETFs, offering a broad diversification. The portfolio is classified as balanced, which implies a mix of growth and income with moderate risk. With a diversification score of 4 out of 5, it shows a well-spread allocation across different markets. This composition is relevant because it reduces the risk of being heavily impacted by the downturn of a single market. It's recommended to maintain this diversification to balance risk and reward effectively.

Growth Info

The portfolio has shown a commendable historical performance with a CAGR of 8.96%. A hypothetical initial investment would have grown significantly over time, although it experienced a maximum drawdown of -22.9%. This indicates that while the portfolio is capable of delivering good returns, it is also susceptible to market volatility. Understanding this performance is crucial as it sets realistic expectations for future returns. It's advisable to be prepared for such fluctuations and focus on long-term growth rather than short-term gains.

Projection Info

Using a Monte Carlo simulation with 1,000 simulations, the portfolio shows a wide range of potential outcomes. A Monte Carlo simulation provides a probabilistic analysis of future performance by simulating various scenarios. The median outcome suggests a growth of 189.76% for a hypothetical initial investment, with a positive return in 915 out of 1,000 simulations. This forward projection indicates a generally optimistic outlook but also highlights the uncertainty inherent in investing. It's recommended to stay the course and avoid making decisions based on short-term market movements.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.84% in equities, and negligible allocations in cash, bonds, and other asset classes. This concentration in stocks suggests a focus on growth, which is relevant for investors seeking higher returns. However, it also means the portfolio is exposed to higher volatility. To improve the portfolio's resilience, consider diversifying into other asset classes like bonds, which can provide stability and income, especially during market downturns.

Sectors Info

  • Financials
    23%
  • Industrials
    17%
  • Consumer Discretionary
    14%
  • Energy
    10%
  • Technology
    9%
  • Basic Materials
    8%
  • Health Care
    6%
  • Consumer Staples
    5%
  • Telecommunications
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is diversified across several sectors, with the largest allocations in Financial Services, Industrials, and Consumer Cyclicals. This spread across sectors is beneficial as it reduces reliance on any single industry. However, sectors like Utilities and Real Estate have minimal representation, which could limit defensive capabilities during economic downturns. It's important to understand how sector allocation affects risk and return. To enhance stability, consider increasing exposure to more defensive sectors without compromising growth potential.

Regions Info

  • North America
    54%
  • Europe Developed
    23%
  • Japan
    14%
  • Asia Developed
    3%
  • Australasia
    3%
  • Africa/Middle East
    1%

Geographically, the portfolio is primarily invested in North America, followed by Europe Developed and Japan. This allocation provides exposure to major global markets, which is advantageous for capturing growth opportunities. However, emerging markets have minimal representation, which might limit potential high-growth opportunities. Geographic diversification is crucial in mitigating risks associated with regional economic downturns. To optimize geographic exposure, consider gradually increasing allocations to emerging markets, balancing the potential for higher returns with the associated risks.

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 is on a good path but could be optimized further. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio. For a riskier approach, consider increasing stock exposure or adding growth-oriented assets. For a more conservative stance, incorporate more bonds or defensive sectors. Before optimizing, ensure the portfolio aligns with financial goals and risk tolerance. Once aligned, small adjustments can enhance performance without drastically altering the risk profile.

Dividends Info

  • Avantis® U.S. Equity ETF 1.20%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Dimensional International Value ETF 3.70%
  • Schwab Fundamental International Small Company Index ETF 2.80%
  • Weighted yield (per year) 2.30%

The portfolio offers a decent dividend yield of 2.3%, with the Dimensional International Value ETF contributing the highest at 3.7%. Dividends provide an additional income stream, which can be reinvested to enhance returns or used for income needs. A steady dividend yield is attractive for investors seeking regular income. To maximize this benefit, consider focusing on ETFs or funds with a history of stable or increasing dividends, ensuring a balance between growth and income.

Ongoing product costs Info

  • Avantis® U.S. Equity ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Dimensional International Value ETF 0.27%
  • Schwab Fundamental International Small Company Index ETF 0.39%
  • Weighted costs total (per year) 0.26%

The portfolio's total expense ratio (TER) is 0.26%, with individual ETF costs ranging from 0.15% to 0.39%. These costs are relatively low, which is favorable as lower costs can significantly impact net returns over the long term. Understanding the impact of costs is crucial as they can erode investment gains. It's recommended to continuously monitor and compare these costs with similar investments to ensure competitiveness and to keep the portfolio's cost structure efficient.

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