A growth-focused portfolio with high US exposure and low diversification across sectors

Report created on Dec 14, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

This portfolio comprises two primary ETFs: Vanguard S&P 500 ETF at 60% and Avantis U.S. Small Cap Value ETF at 40%. This composition leans heavily towards equities, reflecting a growth-focused strategy. The dominance of these ETFs suggests a preference for U.S. large-cap and small-cap value stocks. Such a setup can offer robust growth potential but may also introduce higher volatility due to limited diversification. To enhance stability, consider incorporating other asset types like bonds or international equities.

Growth Info

Historically, this portfolio has shown a Compound Annual Growth Rate (CAGR) of 18.29% with a maximum drawdown of -38.98%. This indicates strong growth potential but with significant risk during downturns. A high CAGR suggests that the portfolio has performed well over the years, but the substantial drawdown highlights vulnerability during market stress. It's essential to weigh these factors against your risk tolerance and financial goals. Diversifying into less volatile assets could mitigate such risks.

Projection Info

Using Monte Carlo simulations, the portfolio's future performance was projected with a median outcome of 834.93% growth. This method uses historical data to simulate potential future returns, but it's important to note that past performance does not guarantee future results. While the 50th percentile projection shows promising growth, the 5th percentile indicates a potential downside of 89.59%. Diversifying into different asset classes could help manage these risks while aiming for growth.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with a minimal allocation to cash. This concentration in equities suggests a high-risk, high-reward strategy. While equities can offer significant growth potential, they also expose the portfolio to market volatility. To balance risk and reward, consider adding fixed-income securities or alternative investments. This could help stabilize returns during market downturns, providing a cushion against potential losses.

Sectors Info

  • Technology
    22%
  • Financials
    19%
  • Consumer Discretionary
    12%
  • Industrials
    12%
  • Energy
    8%
  • Health Care
    8%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Utilities
    2%
  • Real Estate
    2%

The sector distribution shows a strong emphasis on Technology and Financial Services, together making up over 40% of the portfolio. While these sectors can drive growth, their concentration can increase exposure to sector-specific risks. A more balanced sector allocation could mitigate these risks. Consider diversifying into underrepresented sectors like Utilities or Real Estate, which can offer stability and income potential, especially during economic downturns.

Regions Info

  • North America
    99%
  • Latin America
    1%

With 98.79% of assets in North America, the portfolio has limited geographic diversification. This heavy reliance on U.S. markets can lead to vulnerability to domestic economic fluctuations. Expanding geographic exposure could enhance diversification and reduce risk. Consider allocating a portion of the portfolio to international markets, which can offer growth opportunities and hedge against U.S.-specific risks.

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.

By applying the Efficient Frontier concept, the portfolio can potentially achieve a better risk-return ratio. This involves adjusting the current asset allocation to optimize performance. While the portfolio already targets growth, further optimization could enhance returns without significantly increasing risk. Regularly review asset performance and market conditions to make informed adjustments, ensuring alignment with financial goals and risk appetite.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.32%

The portfolio yields an average dividend of 1.32%, with contributions from both ETFs. While dividends provide a steady income stream, they are relatively modest in this portfolio. To enhance income, consider adding higher-yielding assets like dividend-focused funds or REITs. This could complement growth objectives while providing regular cash flow, especially useful during market downturns when capital gains may be limited.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.12%

With an overall expense ratio of 0.12%, the portfolio is cost-efficient. Low costs are crucial for maximizing net returns over time, as fees can erode profits. While the Vanguard S&P 500 ETF offers minimal costs, the Avantis ETF is slightly higher. Continuously monitor and compare expense ratios to ensure cost-effectiveness. Consider rebalancing towards lower-cost options if they align with your investment strategy and risk tolerance.

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