Growth-Oriented Portfolio with Broad Diversification and Strong Historical Performance but High Risk

Report created on Dec 2, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards equities, with a 99.6% allocation to stocks. This composition leans towards a growth-oriented strategy, aiming for higher returns. A significant portion, 65%, is allocated to the Vanguard Total Stock Market Index Fund, providing broad exposure to the U.S. market. This is complemented by international exposure through a 15% allocation to the Vanguard Total International Stock Index Fund. Smaller allocations to U.S. Small Cap Value and Large-Cap Growth ETFs add diversity. Such a composition is suitable for those seeking capital appreciation but involves higher risk due to the heavy equity exposure.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 16.56%. This indicates strong past performance, likely due to the significant U.S. market exposure. However, the maximum drawdown of -35.54% suggests vulnerability during market downturns. The returns are concentrated in a few days, with 90% of returns occurring in just 17 days. This highlights the importance of staying invested during volatile times. While past performance is not indicative of future results, the historical data suggests potential for significant growth, albeit with considerable risk.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. The simulation, which uses random sampling to model potential outcomes, showed an annualized return of 18.21%. The 5th percentile indicates a worst-case scenario with a return of 79.9%, while the median (50th percentile) projects a 677.51% return. The optimistic 67th percentile suggests a 1,021.62% return. These projections reflect the portfolio's growth potential, but also the inherent uncertainty and risk. Investors should be prepared for a wide range of outcomes, aligning with their risk tolerance.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely invested in stocks, with a negligible allocation to cash and other asset classes. This concentration in equities is typical for a growth-focused strategy, aiming for higher returns over the long term. However, such an approach also increases exposure to market volatility. Diversifying across different asset classes, like bonds or real estate, could help mitigate risk and provide more stability. For those seeking a balanced risk-return profile, considering a more diversified asset allocation may be beneficial.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    5%
  • Basic Materials
    3%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio is well-diversified across various sectors, with a strong emphasis on technology (27.41%) and financial services (15.44%). This sector allocation reflects a growth-oriented strategy, capitalizing on sectors with high growth potential. While this diversification can reduce sector-specific risks, the heavy reliance on technology might expose the portfolio to volatility if the sector underperforms. Balancing the sector allocation by considering more defensive sectors could help mitigate risk and provide more stability during market downturns.

Regions Info

  • North America
    86%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is heavily skewed towards North America, making up 85.63% of the holdings. This concentration provides significant exposure to the U.S. market, which has historically delivered strong returns. However, it also increases vulnerability to regional economic downturns. The remaining allocation is spread across Europe, Asia, and other regions, offering some international diversification. To reduce geographic risk, investors might consider increasing exposure to emerging markets or other regions, potentially capturing growth opportunities outside North America.

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 already optimized for growth, but there is room for further refinement. By moving along the efficient frontier, investors can adjust the risk-return profile. To achieve a riskier portfolio, increasing exposure to small-cap or emerging markets could be considered. Conversely, to create a more conservative portfolio, incorporating more bonds or defensive sectors might be beneficial. However, the current asset allocation and sector diversification already provide a solid foundation for growth. Investors should focus on aligning the portfolio with their risk tolerance and long-term goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.42%

The portfolio's dividend yield is 1.42%, primarily driven by the Vanguard Total International Stock Index Fund, which yields 3.0%. This yield provides a modest income stream, supplementing the portfolio's growth focus. While dividends can offer some stability and income, the portfolio's overall yield is relatively low, reflecting its growth orientation. Investors seeking higher income might consider incorporating higher-yielding assets. However, it's essential to balance the desire for income with the portfolio's growth objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is 0.06%, which is quite low, reflecting the cost-efficient nature of the selected ETFs. Low costs are advantageous as they help maximize net returns over time. The Vanguard and Schwab funds contribute to this low cost, while the Avantis ETF has a slightly higher expense ratio. Keeping investment costs low is crucial for long-term success, and this portfolio does an excellent job in that regard. Regularly reviewing costs and ensuring they remain competitive is a good practice for maintaining portfolio efficiency.

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