Growth-Oriented Broadly Diversified Portfolio with Strong Performance and Overlapping Assets Needing Optimization

Report created on Dec 2, 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 a diverse range of ETFs, with a strong emphasis on growth-oriented assets. The Vanguard Total World Stock Index Fund ETF Shares hold the largest allocation at 40%, followed by the Vanguard Total Stock Market Index Fund ETF Shares at 25%. The remaining investments are spread across various ETFs, including Avantis U.S. Small Cap Value ETF and Invesco S&P MidCap Quality ETF. This composition reflects a growth-focused strategy with a significant tilt towards equities, aiming to capture returns from a wide array of market opportunities. The portfolio is broadly diversified, minimizing risk through exposure to different sectors and geographies.

Growth Info

Historically, the portfolio has delivered impressive returns, with a compound annual growth rate (CAGR) of 18.14%. However, it also experienced a maximum drawdown of -38.31%, indicating potential volatility. This performance suggests that while the portfolio can generate substantial returns, investors should be prepared for significant fluctuations in value. The concentration of returns in just 17 days highlights the importance of staying invested to capture these gains. To capitalize on the historical performance, maintaining a long-term perspective and avoiding panic during market downturns will be crucial for optimizing returns.

Projection Info

Utilizing a Monte Carlo simulation, we projected the portfolio's future performance based on a hypothetical initial investment. With 1,000 simulations, the portfolio's annualized return was estimated at 25.47%. The simulation suggests a wide range of potential outcomes, with the 5th percentile at 94.59% and the 67th percentile at 2,073.53%. This indicates a high probability of positive returns, but also underscores the inherent uncertainty in market dynamics. Investors should be aware of the potential for both substantial growth and risk, and consider aligning their strategies with their risk tolerance and financial goals.

Asset classes Info

  • Stocks
    98%
  • Cash
    2%

The portfolio is heavily weighted towards stocks, comprising 98.01% of the total allocation. This high equity exposure aligns with the growth-oriented strategy, offering potential for substantial capital appreciation. However, the limited exposure to bonds and other asset classes may increase the portfolio's sensitivity to market volatility. To enhance stability, consider incorporating a more balanced mix of asset classes, such as bonds or cash, which can provide a buffer during market downturns. This approach can help manage risk while still pursuing growth opportunities.

Sectors Info

  • Technology
    26%
  • Financials
    15%
  • Industrials
    13%
  • Consumer Discretionary
    11%
  • Health Care
    9%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation within the portfolio is well-diversified, with significant exposure to technology (25.51%), financial services (15.08%), and industrials (12.89%). This diversification across sectors helps mitigate sector-specific risks and capture growth from various economic segments. However, the heavy concentration in technology may expose the portfolio to sector-specific volatility. To optimize sector allocation, ensure a balanced mix that aligns with market trends and economic cycles. This strategy can help reduce risk and improve the portfolio's resilience to sector-specific downturns.

Regions Info

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

Geographically, the portfolio is predominantly focused on North America, which accounts for 85.19% of the allocation. While this concentration in a stable and developed market offers growth potential, it may limit exposure to emerging markets with higher growth prospects. To enhance geographic diversification, consider expanding investments in regions such as Asia or Latin America. This approach can capture growth opportunities in emerging markets, providing a more balanced global exposure and reducing reliance on any single region's economic performance.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    ProShares Ultra S&P500
    Vanguard S&P 500 ETF
    Vanguard Total World Stock Index Fund ETF Shares
    High correlation

The portfolio contains several highly correlated assets, particularly among U.S. equity-focused ETFs like the Vanguard Total Stock Market Index Fund ETF Shares and ProShares Ultra S&P500. This high correlation suggests overlapping exposure, which may not provide additional diversification benefits. To optimize the portfolio, consider reducing positions in correlated assets and reallocating to investments with lower correlation. This strategy can enhance diversification, reduce risk, and improve the overall efficiency of the portfolio by minimizing redundant exposure.

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.

Before optimizing the portfolio, focus on reducing overlapping assets that offer no diversification benefits. By addressing this, the portfolio can be more efficiently aligned with the investor's risk tolerance and financial goals. For those seeking a riskier portfolio, consider increasing allocations to equities or high-growth sectors. Conversely, a more conservative approach could involve adding bonds or cash to reduce volatility. Moving along the efficient frontier can help achieve the desired risk-return balance, ensuring the portfolio is optimized for the investor's specific objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • ProShares Ultra QQQ 0.30%
  • ProShares Ultra S&P500 0.70%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Invesco S&P MidCap Quality ETF 4.70%
  • Weighted yield (per year) 1.75%

The portfolio's dividend yield stands at 1.75%, with the Invesco S&P MidCap Quality ETF contributing the highest yield at 4.7%. While the overall yield is modest, it provides a steady income stream that can complement capital appreciation. To enhance dividend income, consider increasing allocations to higher-yielding investments or incorporating dividend-focused strategies. This approach can provide a balanced mix of growth and income, appealing to investors seeking both capital appreciation and regular cash flow from their investments.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • ProShares Ultra QQQ 0.95%
  • ProShares Ultra S&P500 0.91%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Invesco S&P MidCap Quality ETF 0.25%
  • Weighted costs total (per year) 0.18%

The total expense ratio (TER) of the portfolio is 0.18%, indicating a relatively low cost structure. This is beneficial for long-term investors, as lower costs can significantly enhance net returns over time. However, some ETFs, like ProShares Ultra QQQ with a 0.95% expense ratio, are higher than average. To further reduce costs, consider reallocating to lower-cost alternatives or consolidating similar positions. Maintaining a low-cost portfolio is crucial for maximizing returns and achieving financial goals efficiently.

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