A growth-focused portfolio with a strong bias towards the US market and large-cap equities
Report created on Dec 28, 2024Risk profile
5/7
Diversification profile
4/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 70.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 15.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 15.00%
The portfolio is heavily weighted towards the Vanguard S&P 500 ETF, comprising 70% of its assets. This suggests a strong preference for large-cap US equities, which are generally considered stable and reliable. The remaining 30% is split evenly between a small-cap value ETF and an international stock index ETF, providing some exposure to smaller US companies and international markets. Compared to a typical growth benchmark, this portfolio leans heavily towards US equities, which can be beneficial for stability but may limit exposure to high-growth international opportunities.
Growth
Historically, the portfolio has delivered a robust compound annual growth rate (CAGR) of 15.85%, indicating strong performance over time. This growth rate surpasses many traditional benchmarks, reflecting the portfolio’s emphasis on large-cap US equities. However, it also experienced a significant maximum drawdown of 35.6%, illustrating the potential volatility associated with growth-focused investments. While past performance is not indicative of future results, these trends provide a useful context for understanding the portfolio's behavior in different market conditions.
Projection
Forward projections using Monte Carlo simulations suggest a wide range of potential outcomes, highlighting the inherent uncertainty in future market conditions. The analysis shows a median expected growth of 435.04%, with a 67th percentile outcome of 687.67%, indicating strong potential returns. However, it’s important to remember that these projections rely on historical data and assumptions, which may not fully capture future market dynamics. This underscores the importance of regularly reviewing and adjusting the portfolio to align with evolving market conditions and personal investment goals.
Asset classes
- Stocks 100%
The portfolio is almost entirely invested in stocks, with a negligible amount in cash and other asset classes. This high equity allocation is typical for a growth-oriented portfolio, aiming to maximize returns over the long term. However, it also increases exposure to market volatility, as stocks can fluctuate significantly in value. For those seeking enhanced diversification, incorporating other asset classes such as bonds or real estate could help mitigate risk and provide more stable returns during market downturns.
Sectors
- Technology 26%
- Financials 17%
- Consumer Discretionary 11%
- Industrials 10%
- Health Care 10%
- Telecommunications 7%
- Consumer Staples 6%
- Energy 5%
- Basic Materials 4%
- Utilities 2%
- Real Estate 2%
The portfolio is well-diversified across various sectors, with a notable emphasis on technology and financial services, comprising over 40% of the total allocation. This sector composition aligns with common growth benchmarks, reflecting a focus on industries with high potential for innovation and expansion. However, the concentration in technology can lead to increased volatility, especially during periods of regulatory scrutiny or interest rate changes. Balancing this exposure with investments in more stable sectors could help manage risk while maintaining growth potential.
Regions
- North America 85%
- Europe Developed 6%
- Asia Emerging 3%
- Japan 2%
- Asia 2%
- Australasia 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily concentrated in North America, with 85.5% of assets allocated to this region. While this provides stability and familiarity, it limits exposure to emerging markets and other international opportunities that can offer higher growth potential. Diversifying further into regions like Asia or Latin America could enhance returns and reduce geographic risk, particularly as global markets evolve. A more balanced geographic allocation can also hedge against potential economic downturns in the US.
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 potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return balance based on current assets. By adjusting the allocation between existing ETFs, it may be possible to achieve a more efficient portfolio that maximizes returns for a given level of risk. This optimization does not necessarily imply changing asset classes or sectors but rather fine-tuning the existing allocation to improve the risk-return ratio.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- Vanguard S&P 500 ETF 1.20%
- Vanguard Total International Stock Index Fund ETF Shares 3.30%
- Weighted yield (per year) 1.58%
The portfolio’s dividend yield is relatively modest at 1.58%, reflecting its growth-oriented strategy. While dividends can provide a steady income stream, the focus here is on capital appreciation rather than income generation. For investors seeking higher income, reallocating some assets to dividend-focused funds or stocks could increase the yield. However, it’s important to balance this with the portfolio’s growth objectives, as higher dividends can sometimes come at the expense of capital growth potential.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Vanguard S&P 500 ETF 0.03%
- Vanguard Total International Stock Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.07%
The portfolio benefits from low overall costs, with a total expense ratio (TER) of 0.07%. This is advantageous for long-term investors, as lower fees can significantly enhance net returns over time. The Vanguard S&P 500 ETF, in particular, offers a very low expense ratio of 0.03%, contributing to the cost efficiency of the portfolio. Continuously monitoring and minimizing investment costs is a prudent strategy, allowing more of the portfolio's gains to be retained by the investor.
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