Growth-Oriented Portfolio with Broad Diversification and Moderate Risk for Long-Term Investors in the USA

Report created on Dec 5, 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 composed of three ETFs, with a significant weighting towards the Vanguard S&P 500 ETF at 45%. This is complemented by the Vanguard Total International Stock Index Fund ETF Shares at 35% and the Avantis International Small Cap Value ETF at 20%. This mix provides a broad exposure to both domestic and international markets, ensuring that the portfolio is well-diversified across various geographies and sectors. Such a composition helps reduce specific risks associated with individual stocks or sectors, although it remains heavily reliant on equity markets.

Growth Info

Historically, the portfolio has shown a solid performance, with a compound annual growth rate (CAGR) of 12.94%. This suggests that a hypothetical initial investment would have grown significantly over time. However, it is important to note the maximum drawdown of -35.39%, indicating substantial volatility during market downturns. This level of volatility is typical for growth-oriented portfolios and reflects the higher risk associated with seeking substantial returns. Understanding this helps investors prepare for potential fluctuations in portfolio value.

Projection Info

Using a Monte Carlo simulation, which involves running multiple scenarios to predict future performance, the portfolio shows promising potential. With 1,000 simulations, the median outcome suggests a 323.47% increase in portfolio value. While 973 simulations resulted in positive returns, the 5th percentile outcome is still a respectable 23.58%, showcasing the portfolio's resilience. This forward-looking analysis provides a range of possible outcomes, helping investors manage expectations and prepare for different market conditions.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is predominantly composed of stocks, making up 99.2% of the total allocation. This heavy equity exposure aligns with the growth profile, aiming for higher returns over time. A small portion is held in cash and other assets, which can provide some liquidity but does not significantly impact the overall risk profile. The lack of bonds implies a higher risk tolerance, as bonds typically offer more stability and lower volatility compared to stocks. Investors should consider their comfort with this level of risk.

Sectors Info

  • Technology
    20%
  • Financials
    16%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Basic Materials
    7%
  • Telecommunications
    6%
  • Consumer Staples
    6%
  • Energy
    5%
  • Utilities
    3%
  • Real Estate
    3%

Sector allocation within the portfolio is diverse, with the highest exposure in Technology at 20.16%, followed by Financial Services and Industrials. This diversification across multiple sectors helps mitigate risks associated with sector-specific downturns. Having exposure to various industries can provide balance, as different sectors perform differently under varying economic conditions. However, the portfolio's significant reliance on technology and financials suggests a need to monitor these sectors closely for any potential risks or opportunities.

Regions Info

  • North America
    50%
  • Europe Developed
    22%
  • Japan
    12%
  • Asia Emerging
    6%
  • Asia Developed
    4%
  • Australasia
    4%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is well-diversified, with nearly half of the assets allocated to North America and a significant portion in Europe Developed and Japan. This global exposure helps reduce risks associated with economic downturns in a single region. By investing across multiple continents, the portfolio can benefit from growth opportunities worldwide. However, it's essential to be aware of geopolitical risks and economic conditions in these regions, as they can impact the portfolio's performance.

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 optimization chart suggests that there is room for optimization along the efficient frontier. By adjusting the asset allocation, investors can achieve a riskier or more conservative portfolio, depending on their risk appetite and financial goals. Moving towards a more conservative allocation may involve incorporating more bonds or other fixed-income assets, while a riskier approach could increase exposure to equities. It's essential to align these adjustments with the investor's long-term strategy and risk tolerance, ensuring that the portfolio remains well-positioned for future growth.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.00%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 2.16%

The portfolio offers a moderate dividend yield of 2.16%, with contributions from all three ETFs. The Avantis International Small Cap Value ETF provides the highest yield at 3.0%, followed by the Vanguard Total International Stock Index Fund ETF Shares at 2.9%. Dividends can provide a steady income stream, which is particularly beneficial during periods of market volatility. Reinvesting these dividends can also contribute to the portfolio's growth over time, enhancing the overall return potential.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

With a total expense ratio (TER) of 0.11%, the portfolio is cost-effective, minimizing the impact of fees on overall returns. The Vanguard S&P 500 ETF has the lowest cost at 0.03%, reflecting its efficiency. Keeping investment costs low is crucial for maximizing long-term returns, as high fees can significantly erode gains over time. Investors should continue to monitor these costs and seek opportunities to optimize them further, ensuring that the portfolio remains efficient and aligned with their financial goals.

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