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

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 four ETFs, with a significant allocation to the Vanguard Total Stock Market Index Fund ETF Shares at 45%. This indicates a strong focus on broad U.S. market exposure. The inclusion of the Vanguard Total International Stock Index Fund ETF Shares at 25% adds international diversification. The Avantis U.S. Small Cap Value ETF and Schwab U.S. Large-Cap Growth ETF, each at 15%, provide a mix of growth and value opportunities. This composition suggests a well-rounded approach to capturing both domestic and international market movements, while maintaining a balance between large-cap growth and small-cap value equities.

Growth Info

Historically, the portfolio has performed well with a compound annual growth rate (CAGR) of 16.27%. This indicates strong growth over time, although it has experienced a maximum drawdown of -35.74%, reflecting potential volatility during market downturns. The concentrated days of returns suggest that the portfolio's gains are driven by specific market conditions or events. This performance history highlights the portfolio's ability to generate substantial returns, but also underscores the importance of being prepared for periods of significant volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected based on a hypothetical initial investment. The results show a wide range of potential outcomes, with a 5th percentile return of 61.24% and a 67th percentile return of 1,018.83%. The median outcome stands at 688.96%. This indicates a high likelihood of positive returns, with 986 out of 1,000 simulations yielding gains. The annualized return across all simulations is 18.37%, suggesting strong potential for future growth, albeit with some degree of uncertainty.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.5% allocated to this asset class. This high concentration in equities reflects a growth-oriented strategy, aiming for capital appreciation over time. The minimal allocation to cash and other asset classes suggests a focus on maximizing returns rather than preserving capital. For investors seeking long-term growth, this allocation is appropriate, but it also implies higher risk due to the lack of diversification into more stable asset classes like bonds or fixed-income securities.

Sectors Info

  • Technology
    25%
  • Financials
    17%
  • Consumer Discretionary
    12%
  • Industrials
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation in the portfolio is diverse, with technology leading at 25.29%, followed by financial services and consumer cyclicals. This spread across various sectors indicates a balanced approach, reducing dependency on any single sector's performance. However, the high allocation to technology may expose the portfolio to sector-specific risks. To maintain balance, it's important to monitor sector trends and adjust allocations if necessary to ensure that no single sector disproportionately impacts the portfolio's overall performance.

Regions Info

  • North America
    76%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly invested in North America, accounting for 76.38% of the allocation. This strong focus on the U.S. market aligns with the portfolio's growth profile but may limit exposure to potential opportunities in other regions. The remaining allocation is spread across developed and emerging markets, providing some international diversification. For a more balanced global approach, consider increasing exposure to regions outside North America, which could enhance diversification and reduce reliance on the U.S. market.

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 the current allocation is close to the efficient frontier, indicating a well-balanced risk-return profile. For those looking to adjust risk levels, moving along the efficient frontier can help achieve a riskier or more conservative portfolio. Increasing exposure to equities can enhance potential returns but also heighten risk, while incorporating more stable assets like bonds can offer a more conservative approach. It's important to align these adjustments with personal risk tolerance and investment 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 2.90%
  • Weighted yield (per year) 1.55%

The portfolio offers a moderate dividend yield of 1.55%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 2.9%. This income can provide a cushion during periods of market volatility and contribute to overall returns. However, the focus remains on capital appreciation rather than income generation. For investors seeking higher income, exploring additional dividend-focused investments could be beneficial. Balancing growth with income can create a more resilient investment strategy over time.

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) 0.08%

The portfolio's total expense ratio is 0.08%, reflecting low costs associated with the selected ETFs. This is advantageous for long-term growth, as lower fees can significantly enhance net returns over time. The Avantis U.S. Small Cap Value ETF has the highest cost at 0.25%, but the overall cost remains competitive. Maintaining low investment costs is crucial for maximizing portfolio performance. Regularly reviewing and ensuring that fees remain competitive can help preserve capital and improve the portfolio's overall efficiency.

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