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A growth-focused portfolio with strong US equity exposure and moderate international diversification

Report created on Dec 30, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification
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Positions

The portfolio is heavily weighted towards US equities, with a substantial 50% in the Vanguard S&P 500 ETF. This allocation reflects a focus on large-cap growth and stability, typical of a growth-oriented strategy. The inclusion of international stocks through the Vanguard Total International Stock Index Fund ETF adds diversification but remains a smaller portion at 15%. This composition suggests a preference for US market stability while capturing some global growth opportunities. To enhance diversification, consider increasing international exposure or adding fixed-income assets to balance potential volatility.

Growth Info

The portfolio's historical performance is impressive, with a Compound Annual Growth Rate (CAGR) of 16.02%. This indicates strong growth over time, outpacing many typical benchmarks. However, a maximum drawdown of -35.11% highlights the potential volatility and risks associated with growth-focused portfolios. Such drawdowns can be unsettling, especially during market downturns. While past performance is not a guarantee of future results, maintaining a diversified approach and periodically reviewing asset allocation can help mitigate risks and sustain growth.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a 50th percentile return of 557.53% over the investment horizon. This method uses historical data to forecast future performance, though it should be noted that it cannot predict actual future results. The portfolio's annualized return of 17.3% across simulations suggests a robust growth potential. However, given the inherent uncertainties of market conditions, it's crucial to regularly reassess the portfolio's alignment with your risk tolerance and financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with over 99% allocation, leaving minimal exposure to other asset classes like cash or bonds. This heavy stock allocation can drive significant growth but also introduces higher volatility. Compared to a balanced benchmark, this portfolio lacks the stabilizing effect that bonds or other asset classes might provide. To reduce potential volatility, consider diversifying into bonds or other fixed-income securities, which can offer stability and income during market fluctuations.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Industrials
    12%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is diverse, with a notable 26% in technology, reflecting a growth-oriented strategy. The portfolio also has significant exposure to financial services and industrials. This distribution aligns closely with benchmark norms, which often emphasize tech and financial sectors. However, tech-heavy portfolios can be more volatile, especially during interest rate hikes or regulatory changes. To mitigate risk, consider balancing exposure by increasing allocations to defensive sectors like healthcare or consumer staples, which tend to perform well during economic downturns.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic exposure is heavily skewed towards North America, accounting for over 85% of the allocation. This concentration limits the benefits of geographic diversification, which can reduce risk by spreading investments across different economic regions. The limited exposure to emerging markets and other international regions may miss out on growth opportunities outside the US. To enhance diversification and capture global growth, consider increasing allocations to underrepresented regions, such as Asia or Europe.

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.

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The portfolio could potentially be optimized using the Efficient Frontier, which seeks the best risk-return ratio. This involves adjusting the allocation of current assets to achieve maximum returns for a given level of risk. By fine-tuning the balance between high-risk and stable assets, you can enhance efficiency without necessarily diversifying further. Regularly reviewing the portfolio's risk-return profile and making adjustments as needed can help ensure it remains aligned with your investment goals and risk tolerance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Invesco S&P MidCap Quality ETF 5.00%
  • Weighted yield (per year) 1.98%

With a total dividend yield of 1.98%, the portfolio provides a moderate income stream. The Schwab U.S. Dividend Equity ETF and Invesco S&P MidCap Quality ETF contribute significantly to this yield. Dividends can be a reliable source of income and help cushion against market volatility. However, for a growth-focused portfolio, dividends may play a secondary role to capital appreciation. If income is a priority, consider increasing allocations to high-dividend-yielding assets or funds.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Invesco S&P MidCap Quality ETF 0.25%
  • Weighted costs total (per year) 0.08%

The portfolio's Total Expense Ratio (TER) is impressively low at 0.08%, indicating cost efficiency. Lower costs enhance long-term returns by minimizing the drag on performance. The use of low-cost ETFs like the Vanguard S&P 500 ETF and Schwab U.S. Large-Cap Growth ETF contributes to this efficiency. Maintaining a focus on cost-effective investments is a sound strategy, but it's essential to periodically review all fees to ensure they remain competitive and aligned with your investment objectives.

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