Balanced Growth Portfolio with Broad Diversification and Moderate Risk for Long-Term Investors

Report created on Nov 10, 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 four ETFs, with a significant focus on U.S. equities. The Schwab U.S. Large-Cap Growth ETF holds the largest portion at 50%, followed by the Avantis U.S. Small Cap Value ETF at 30%. This indicates a strong emphasis on growth and value strategies within the U.S. market. The remaining 20% is split between Vanguard FTSE Developed Markets and Emerging Markets ETFs, providing international exposure. This composition suggests a strategy aimed at capitalizing on both domestic and international market opportunities, while maintaining a growth-oriented approach.

Growth Info

Historically, the portfolio has demonstrated impressive performance with a compound annual growth rate (CAGR) of 18.82%. However, it also experienced a significant maximum drawdown of -36.19%, indicating potential volatility. The concentration of returns over just 19 days highlights the importance of timing in capturing gains. This performance pattern suggests a high-growth potential but also underscores the need for investors to be prepared for periods of market downturns. To optimize returns, maintaining a long-term perspective and avoiding reactionary decisions during market fluctuations is advisable.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations. Assuming a hypothetical initial investment, the portfolio shows promising potential with a median expected return of 443.57% and a positive return in 963 out of 1,000 simulations. This suggests a high probability of achieving substantial growth over time. However, the variability in outcomes also indicates inherent risk. Investors should consider this risk-reward balance and ensure it aligns with their financial goals and risk tolerance.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The asset class allocation is heavily skewed towards stocks, which make up 99.44% of the portfolio. This high equity exposure aligns with the growth profile but comes with increased volatility. A small cash allocation provides minimal liquidity, while other asset classes are negligible. This concentration in equities suggests a focus on capital appreciation. For investors seeking to reduce risk, incorporating more fixed-income securities could provide stability and diversification against market downturns.

Sectors Info

  • Technology
    29%
  • Financials
    17%
  • Consumer Discretionary
    13%
  • Industrials
    10%
  • Telecommunications
    8%
  • Health Care
    8%
  • Energy
    6%
  • Basic Materials
    4%
  • Consumer Staples
    3%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is diversified across multiple sectors, with a strong emphasis on Technology, Financial Services, and Consumer Cyclicals. This sector allocation reflects a strategy to capitalize on growth opportunities in dynamic industries. However, sectors like Real Estate and Utilities are underrepresented, which could limit defensive positioning during economic downturns. To enhance diversification, considering a more balanced sector allocation could mitigate risks associated with overexposure to certain industries.

Regions Info

  • North America
    80%
  • Asia Emerging
    6%
  • Europe Developed
    6%
  • Asia Developed
    3%
  • Japan
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, comprising over 80% of the allocation. While this provides stability and familiarity, it may limit exposure to growth opportunities in emerging and developed markets outside North America. The remaining allocation is spread thinly across regions like Asia, Europe, and Latin America. For a more globally balanced portfolio, increasing exposure to international markets could enhance diversification and capture growth in other regions.

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 potential for improvement by fine-tuning the balance between risk and return. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio, depending on preferences. While the current allocation offers a solid growth trajectory, exploring ways to incorporate more diverse asset classes could enhance risk-adjusted returns. Before making changes, investors should ensure alignment with their financial goals and risk tolerance, focusing on strategic adjustments rather than drastic overhauls.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.22%

The portfolio's dividend yield stands at 1.22%, with contributions from all four ETFs. The Vanguard FTSE Developed Markets and Emerging Markets ETFs offer higher yields compared to the U.S.-focused ETFs. This yield provides a modest income stream, which can be reinvested for compounding growth. While not a primary focus, dividends contribute to total return. Investors seeking higher income may consider increasing allocations to higher-yielding assets, while those prioritizing growth may maintain the current focus.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • 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 returns are retained by the investor, enhancing the compounding effect over time. The Schwab U.S. Large-Cap Growth ETF, with the lowest expense ratio of 0.04%, is particularly cost-efficient. Maintaining a low-cost strategy is crucial, and investors should continue to monitor expense ratios to ensure they remain competitive and do not erode returns.

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