A growth-focused portfolio with strong US exposure and moderate risk for long-term investors

Report created on Dec 14, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with 60% in the Vanguard S&P 500 ETF, 25% in the Vanguard Total International Stock Index Fund ETF Shares, and 15% in the Avantis U.S. Small Cap Value ETF. Such a composition indicates a strong bias towards large-cap U.S. stocks, complemented by international exposure and small-cap value stocks. This structure is typical for a growth-oriented approach, aiming to capture returns from established markets while adding potential upside from smaller, undervalued companies. To enhance diversification, consider adding other asset classes like bonds or real estate, which can provide stability and income.

Growth Info

Historically, this portfolio has shown impressive growth with a compound annual growth rate (CAGR) of 15.39%. However, it's experienced a significant maximum drawdown of -35.67%, indicating substantial volatility. This performance suggests that while the portfolio has the potential for high returns, it also carries considerable risk during market downturns. Investors should be prepared for these fluctuations and consider their risk tolerance. To mitigate potential losses, it might be wise to incorporate some defensive assets or reduce exposure to equities during uncertain economic times.

Projection Info

Forward projections using Monte Carlo simulations show a wide range of potential outcomes, with an annualized return of 16.32%. Monte Carlo simulations use historical data to model thousands of potential future scenarios, providing a statistical range of outcomes. The median projection suggests a substantial growth potential, but the 5th percentile indicates a risk of significant underperformance. These projections underscore the uncertainty inherent in investing and highlight the importance of maintaining a diversified portfolio. Investors should regularly review their allocation to ensure it aligns with their risk tolerance and investment objectives.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is overwhelmingly in stocks, with over 99% equity exposure. This concentration in a single asset class can lead to higher volatility and risk, especially during market downturns. While stocks offer growth potential, diversification across different asset classes, such as bonds or real estate, can help mitigate risk and provide more stable returns. By spreading investments across various asset classes, investors can achieve a more balanced risk-return profile, which is crucial for long-term financial planning and stability.

Sectors Info

  • Technology
    24%
  • Financials
    17%
  • Consumer Discretionary
    11%
  • Industrials
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation in this portfolio is diversified, with a notable concentration in technology (24%), financial services (17%), and consumer cyclicals (11%). This distribution suggests a focus on sectors with growth potential but also exposes the portfolio to sector-specific risks. For instance, technology can be highly volatile, while financial services may be sensitive to interest rate changes. To manage sector risk, consider balancing the portfolio with defensive sectors like utilities or consumer staples, which tend to perform well during economic downturns and provide stability.

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 heavily weighted towards North America (76%), with limited exposure to other regions. This concentration means the portfolio's performance is closely tied to the U.S. economy, potentially increasing vulnerability to domestic economic downturns. Adding more international exposure can enhance diversification and reduce risk by tapping into growth opportunities in emerging markets or other developed regions. A more globally diversified portfolio can benefit from varying economic cycles and reduce reliance on any single market's 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 potentially be optimized using the Efficient Frontier to achieve a more favorable risk-return balance. The Efficient Frontier represents the set of portfolios that offer the highest expected return for a given level of risk. By adjusting the allocation among current assets, investors might achieve a better risk-adjusted return without adding new investments. However, it's essential to remember that optimization is based on historical data and assumptions, which may not predict future performance accurately. Regular rebalancing and reassessment are vital to maintaining an efficient portfolio.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.70%

The portfolio offers a modest dividend yield of 1.7%, with the Vanguard Total International Stock Index Fund ETF Shares contributing the highest yield at 3.0%. While this yield provides some income, it may not be substantial enough for income-focused investors. Dividends can enhance total returns and provide a cushion during market volatility. To increase yield, consider incorporating higher-dividend-paying stocks or funds. However, be cautious of chasing yield, as higher dividends can sometimes indicate underlying risks.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 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 (TER) is relatively low at 0.08%, reflecting cost-effective investment choices. Lower costs contribute positively to long-term returns, as they reduce the drag on performance. However, even small differences in fees can compound over time, impacting overall wealth accumulation. Regularly reviewing and minimizing investment costs by choosing low-cost funds or negotiating fees with financial advisors can enhance net returns. Keeping costs in check is a crucial aspect of effective portfolio management.

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