A growth-oriented portfolio with a strong U.S. small-cap value focus and low diversification

Report created on Jul 21, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is equally split between two ETFs: Avantis® U.S. Small Cap Value ETF and SPDR® Portfolio S&P 1500 Composite Stock Market ETF. This structure leans heavily towards U.S. small-cap value stocks, offering potential for growth but limited diversification. Compared to a typical benchmark, this portfolio is concentrated, which may increase risk. It’s crucial to consider diversifying into other asset classes or regions to mitigate potential downturns in specific sectors or market caps.

Growth Info

With a CAGR of 15.81%, the portfolio has demonstrated strong historical performance. However, it also experienced a significant maximum drawdown of -40.98%, indicating vulnerability during market downturns. Compared to benchmarks, this performance suggests a higher risk-reward trade-off. It’s essential to weigh the potential for high returns against the possibility of substantial losses, especially if the market conditions change unfavorably.

Projection Info

Forward projections using Monte Carlo simulations indicate a wide range of potential outcomes, with an annualized return of 17.31%. The 5th percentile suggests a 38.2% return, while the 67th percentile shows 904.9%. Monte Carlo simulations use historical data to predict future performance, but they cannot guarantee outcomes. Understanding these projections can help set realistic expectations and adjust the portfolio to align with risk tolerance and goals.

Asset classes Info

  • Stocks
    100%

The portfolio is entirely composed of stocks, lacking exposure to other asset classes like bonds or real estate. This single asset class focus can lead to higher volatility and risk, especially during market downturns. Diversifying into other asset classes can provide stability and reduce overall portfolio risk. Comparing to benchmarks, a more balanced allocation could enhance long-term performance and resilience.

Sectors Info

  • Financials
    22%
  • Technology
    19%
  • Consumer Discretionary
    13%
  • Industrials
    13%
  • Energy
    9%
  • Health Care
    7%
  • Consumer Staples
    6%
  • Telecommunications
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    1%

Sector allocation shows a concentration in financial services (22%) and technology (19%), with lesser exposure to other sectors. This concentration can lead to heightened volatility, particularly if these sectors face downturns. A more balanced sector allocation, aligned with common benchmarks, can help mitigate risk and improve diversification. It’s worth considering adjustments to achieve a more even sector distribution.

Regions Info

  • North America
    99%
  • Latin America
    1%
  • Europe Developed
    1%

The portfolio is heavily weighted towards North America (99%), with minimal exposure to other regions. This geographic concentration can increase vulnerability to regional economic shifts. Diversifying geographically can reduce risk and capture growth opportunities in emerging and developed markets outside North America. Comparing to benchmarks, increasing international exposure could enhance diversification and long-term growth potential.

Market capitalization Info

  • Small-cap
    26%
  • Micro-cap
    26%
  • Mega-cap
    21%
  • Large-cap
    17%
  • Mid-cap
    10%

The portfolio has a notable focus on small (26%) and micro-cap (26%) stocks, with less emphasis on mega (21%) and big (17%) caps. This tilt towards smaller companies can offer growth potential but also increases risk and volatility. Balancing market cap exposure can improve diversification and stability. Aligning with benchmarks by increasing exposure to larger-cap stocks could reduce risk and enhance 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 could benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio based on current assets. This approach involves reallocating within existing holdings to achieve a more efficient balance. While diversification is limited, optimizing the allocation can enhance returns relative to risk. It’s crucial to regularly review and adjust the portfolio to maintain efficiency and align with investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.80%
  • SPDR® Portfolio S&P 1500 Composite Stock Market ETF 1.00%
  • Weighted yield (per year) 1.40%

The portfolio has a total dividend yield of 1.40%, with the Avantis® U.S. Small Cap Value ETF contributing 1.80%. While not a primary focus, dividends can provide a steady income stream and enhance total returns. For investors seeking income, considering higher-yielding assets could be beneficial. However, for growth-focused investors, prioritizing capital gains may be more aligned with their objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • SPDR® Portfolio S&P 1500 Composite Stock Market ETF 0.03%
  • Weighted costs total (per year) 0.14%

The portfolio's total expense ratio (TER) is 0.14%, which is impressively low and supports better long-term performance by minimizing costs. Low costs are beneficial as they enhance net returns over time. Maintaining a focus on cost efficiency while exploring additional diversification opportunities can lead to improved portfolio outcomes. This cost structure aligns well with best practices in portfolio management.

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