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

Report created on Dec 30, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is heavily weighted towards US equities, with the Vanguard S&P 500 ETF making up 66% of the holdings. This concentration offers significant exposure to large-cap stocks. The inclusion of small-cap value and high-dividend yield ETFs adds diversity, while the international stock ETF provides a limited global reach. Compared to common benchmarks, this portfolio is less diversified, mainly focusing on US equities. Diversifying further could mitigate risks associated with the US market's volatility and economic cycles. Introducing more international or alternative asset classes could enhance diversification.

Growth Info

Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 15.55%. This suggests robust growth, outperforming many traditional benchmarks. However, the maximum drawdown of -35.57% indicates vulnerability to significant market downturns. While past performance can be reassuring, it's crucial to remember that it doesn't guarantee future results. Investors might consider strategies to protect against such drawdowns, like diversifying further or incorporating more defensive assets.

Projection Info

The Monte Carlo simulation, using 1,000 scenarios, projects potential future outcomes based on historical data. The median (50th percentile) outcome suggests a 382.89% end portfolio value, reflecting strong growth prospects. However, with 5% of simulations showing only a 14.05% return, there's still risk involved. While these projections offer insights, they rely on historical trends, which may not predict future market conditions. Regularly reviewing and adjusting the portfolio in response to market changes can help manage risks and capitalize on opportunities.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, accounting for over 99% of the holdings. This heavy equity allocation aligns with a growth-focused strategy but may expose the investor to higher volatility. Compared to a more balanced asset mix, this portfolio lacks bonds or alternative investments that could provide stability during market fluctuations. To enhance risk management, incorporating fixed income or alternative assets could reduce volatility and provide more consistent returns over time.

Sectors Info

  • Technology
    25%
  • Financials
    17%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    7%
  • Energy
    6%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio's sector allocation is led by technology (25%) and financial services (17%), reflecting a significant tilt towards growth sectors. While these sectors have historically driven returns, they may also introduce higher volatility, especially during economic shifts or interest rate changes. Compared to common benchmarks, the portfolio's sector composition is relatively aligned, but further diversification across sectors might help balance risk. Consider adding exposure to underrepresented sectors to achieve a more even distribution and potentially smoother returns.

Regions Info

  • North America
    91%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    1%
  • Asia Developed
    1%

With 90% exposure to North America, the portfolio is heavily concentrated in this region. While this aligns with the US market's strong historical performance, it limits global diversification. The remaining geographic allocations are minimal, with less than 5% in Europe and even smaller percentages in other regions. This concentration may increase vulnerability to US market-specific risks. To mitigate this, consider increasing exposure to international markets, which may offer growth opportunities and reduce regional risk.

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's current allocation can be optimized using the Efficient Frontier, focusing on achieving the best possible risk-return ratio with existing assets. This approach doesn't necessarily mean adding new investments but rather adjusting the weightings to enhance efficiency. By doing so, the portfolio could potentially achieve higher returns for the same level of risk or maintain returns while reducing risk. Regular rebalancing and analysis can help maintain this optimal allocation over time.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 3.30%
  • Vanguard High Dividend Yield Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.62%

The portfolio's dividend yield stands at 1.62%, with contributions from the high dividend yield ETF and the international stock ETF. This yield provides a modest income stream, which can be appealing for investors seeking some level of cash flow. However, the primary focus remains on growth. While dividends can enhance total returns, they are not the main driver in this portfolio. Investors might consider if a higher yield aligns with their goals or if reinvesting dividends for growth remains the priority.

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%
  • Vanguard High Dividend Yield Index Fund ETF Shares 0.06%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is impressively low at 0.07%, primarily due to the Vanguard S&P 500 ETF's minimal fees. Low costs are beneficial as they leave more returns in the investor's pocket over the long term. This cost efficiency aligns well with best practices in portfolio management. However, it's essential to regularly review these costs to ensure they remain competitive, especially if considering adding new funds or asset classes.

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