Growth Focused Portfolio with Balanced Risk and High Diversification in Global Stocks and Bonds

Report created on Nov 10, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio consists of a mix of six ETFs, with a strong emphasis on equities, particularly U.S. small cap and S&P 500 stocks. It also includes small portions in international equities and bonds, providing a balance between growth and stability. This composition suggests a focus on capturing growth in various markets, with a particular tilt towards U.S. equities. The inclusion of bonds adds a layer of risk mitigation. This diverse mix is suited for those aiming for long-term growth while still maintaining some degree of safety through fixed-income investments.

Growth Info

Historically, the portfolio has shown a strong CAGR of 13.2%, indicating robust growth over time. However, it also experienced a significant max drawdown of -33.73%, highlighting the inherent volatility associated with growth-focused portfolios. The high returns are promising, but the drawdown suggests a need for risk tolerance. The days that make up 90% of returns being only 16 indicate that the portfolio's performance is driven by a few key days, emphasizing the importance of staying invested through market fluctuations to capture these gains.

Projection Info

Using a Monte Carlo simulation, which models potential future outcomes by random sampling, the portfolio's future performance was projected. Assuming a hypothetical initial investment, the median outcome suggests a 175.22% return, while the annualized return across simulations is 10.05%. However, there's a 5% chance of experiencing a -29.57% loss, indicating potential volatility. This analysis underscores the portfolio's potential for significant growth, but also the importance of being prepared for possible downturns, reinforcing the necessity for a long-term investment horizon.

Asset classes Info

  • Stocks
    89%
  • Bonds
    10%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, comprising approximately 89.31% of the total allocation, with a smaller allocation to bonds at 10.01%. This allocation aligns with a growth-oriented strategy, as equities typically offer higher returns over the long term compared to bonds. However, the presence of bonds provides a cushion against market volatility. For investors seeking to balance growth with risk management, this allocation is generally appropriate, though those desiring less risk might consider increasing the bond allocation over time.

Sectors Info

  • Financials
    19%
  • Technology
    15%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Energy
    7%
  • Basic Materials
    6%
  • Health Care
    6%
  • Telecommunications
    5%
  • Consumer Staples
    5%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is diverse, with significant exposure to financial services, technology, and industrials, which collectively make up a large portion of the portfolio. This distribution provides exposure to various economic cycles and potential growth areas. The lower allocations in utilities and real estate suggest less focus on traditionally defensive sectors. This sector mix is well-suited for capturing growth opportunities across different industries, though it may benefit from periodic reviews to ensure alignment with market trends and personal investment goals.

Regions Info

  • North America
    61%
  • Europe Developed
    10%
  • Asia Emerging
    6%
  • Japan
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, accounting for 61.45% of the allocation, followed by smaller positions in Europe and Asia. This reflects a strong confidence in the North American markets, particularly the U.S., while still maintaining global diversification. The exposure to emerging markets, although limited, provides potential for higher growth, albeit with increased risk. This geographic spread is beneficial for capturing diverse economic growth, but investors should be aware of the potential risks associated with international investments.

Redundant positions Info

  • Vanguard FTSE Developed Markets Index Fund ETF Shares
    Avantis® International Small Cap Value ETF
    High correlation

The portfolio contains some highly correlated assets, particularly between the Vanguard FTSE Developed Markets Index Fund ETF Shares and the Avantis® International Small Cap Value ETF. This correlation indicates that these assets may move in similar directions, potentially limiting diversification benefits. Monitoring these correlations can help in understanding portfolio risk and making informed decisions about adjustments. While correlation isn't inherently negative, it's essential to ensure it aligns with the desired risk profile and doesn't inadvertently increase exposure to specific market movements.

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 currently well-diversified, but the presence of highly correlated assets suggests the need for careful monitoring rather than immediate optimization. Moving along the efficient frontier can help achieve a more conservative or riskier portfolio, depending on the investor's goals. For those seeking to reduce risk, increasing bond allocation could be beneficial. Conversely, enhancing equity exposure might suit those pursuing higher returns. However, given the current diversification and correlation levels, focusing on maintaining alignment with long-term goals is more crucial than frequent adjustments.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.30%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 2.12%

The portfolio offers a total dividend yield of 2.12%, with contributions from various ETFs, including a notable 4.3% from the Vanguard Extended Duration Treasury Index Fund ETF Shares. This yield provides a modest income stream, complementing the growth potential of the portfolio. Dividends can offer a buffer during volatile market periods, providing some level of stability. Investors seeking higher income might explore increasing allocations to higher-yielding assets, though this should be balanced with growth objectives and overall risk tolerance.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is relatively low at 0.14%, indicating cost-efficiency. This low TER is beneficial for long-term investors, as it minimizes the impact of fees on overall returns. Keeping investment costs low is crucial for maximizing net gains, especially in a growth-focused portfolio. Regularly reviewing expense ratios and exploring cost-effective alternatives can further enhance portfolio performance. Maintaining a focus on low-cost options while ensuring alignment with investment goals is a sound strategy for optimizing returns.

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