Growth-Focused Broadly Diversified Portfolio with High Risk Score and Overlapping Asset Correlations

Report created on Jun 17, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

This portfolio is composed of six ETFs, with a significant allocation to the Vanguard S&P 500 ETF at 40%. The remaining assets are spread across Avantis U.S. Small Cap Value ETF, Vanguard Mid-Cap Index Fund ETF Shares, Avantis International Small Cap Value ETF, Schwab International Equity ETF, and Vanguard FTSE Emerging Markets Index Fund ETF Shares. The portfolio shows a strong emphasis on equity investments, with minimal allocations to other asset classes. Such a composition suggests a growth-oriented strategy, aiming for capital appreciation. To further enhance diversification, consider including different asset classes that may provide stability during market volatility.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 14.76%. However, it has also experienced a significant maximum drawdown of -37.11%, indicating susceptibility to market downturns. This volatility is typical for growth-focused portfolios, where higher returns come with increased risk. It's crucial to balance the potential for high returns with the ability to withstand market fluctuations. Regularly reviewing performance metrics and considering adjustments can help maintain a balance between risk and return.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This method uses random sampling to model potential outcomes, providing a range of possible future returns. The simulation suggests a median return of 353.2% and an annualized return of 13.74%. While promising, it's important to remember these are hypothetical scenarios. The portfolio's potential for both high returns and losses highlights the need for a strategy that aligns with risk tolerance and investment goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards equities, with 99.34% of assets in stocks. This indicates a strong focus on growth, as stocks typically offer higher returns over the long term compared to other asset classes. However, the lack of significant exposure to bonds or other asset classes could increase volatility and risk. Diversifying into other asset classes, such as bonds or real estate, might help stabilize returns and reduce risk, especially in times of market uncertainty.

Sectors Info

  • Technology
    20%
  • Financials
    18%
  • Industrials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    8%
  • Energy
    6%
  • Telecommunications
    6%
  • Basic Materials
    6%
  • Consumer Staples
    5%
  • Utilities
    3%
  • Real Estate
    3%

The sector allocation is diverse, with a notable emphasis on Technology at 20.26%, followed by Financial Services and Industrials. This distribution reflects a broad market exposure, which can help mitigate sector-specific risks. However, the concentration in Technology may introduce volatility given the sector's cyclical nature. Regularly reviewing sector allocations and ensuring they align with market conditions and personal risk tolerance can help maintain a balanced approach.

Regions Info

  • North America
    72%
  • Europe Developed
    10%
  • Asia Emerging
    6%
  • Japan
    5%
  • Asia
    3%
  • Australasia
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%

Geographically, the portfolio is concentrated in North America, accounting for 71.5% of the allocation. This focus on North American markets may limit exposure to international growth opportunities. While the portfolio includes some international ETFs, further diversification across global markets could enhance potential returns and reduce regional risk. Consider increasing allocations to underrepresented regions to capitalize on diverse economic cycles and growth prospects.

Redundant positions Info

  • Schwab International Equity ETF
    Avantis® International Small Cap Value ETF
    High correlation
  • Vanguard Mid-Cap Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Schwab International Equity ETF and Avantis International Small Cap Value ETF, as well as between the Vanguard Mid-Cap Index Fund ETF Shares and Vanguard S&P 500 ETF. High correlations can reduce diversification benefits, as these assets may move in tandem. To improve diversification, consider including assets that have a lower correlation with existing holdings, thereby enhancing the portfolio's resilience against market swings.

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's current structure suggests it's not on the efficient frontier due to overlapping asset correlations. The efficient frontier represents the set of optimal portfolios offering the highest expected return for a defined level of risk. To move towards optimality, consider reducing correlations by adding more diverse assets. This could involve including asset classes or sectors that behave differently under various market conditions, enhancing the portfolio's risk-return profile.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab International Equity ETF 3.70%
  • Vanguard Mid-Cap Index Fund ETF Shares 1.80%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.92%

The portfolio offers a total dividend yield of 1.92%, with the Schwab International Equity ETF providing the highest yield at 3.7%. Dividends can be an important source of income, especially during market downturns. While the portfolio's yield is moderate, reinvesting dividends can contribute to compounding returns over time. Monitoring dividend yields and adjusting allocations to maintain a balance between growth and income may be beneficial.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab International Equity ETF 0.06%
  • Vanguard Mid-Cap Index Fund ETF Shares 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, which is relatively low and beneficial for long-term growth. Lower costs mean more of the portfolio's returns are retained, enhancing overall performance. It's important to regularly review expense ratios and seek cost-effective investment options. While the current TER is favorable, staying vigilant about fees and expenses can help optimize returns and ensure the portfolio remains efficient.

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