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

Report created on Jan 12, 2025

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 heavily weighted towards the Vanguard S&P 500 ETF, making up 70% of the allocation. This is complemented by a 20% allocation to the Vanguard Total International Stock Index Fund ETF and a 10% stake in the Avantis U.S. Small Cap Value ETF. Such a composition leans towards large-cap US equities, with a modest international and small-cap presence. This structure aligns well with a growth-focused strategy, where the emphasis is on capital appreciation. However, the concentration in large-cap US stocks may expose the portfolio to regional risks, suggesting a potential review of diversification strategies could be beneficial.

Growth Info

Historically, the portfolio has demonstrated a commendable Compound Annual Growth Rate (CAGR) of 14.78%, indicating strong past performance. This is slightly above the typical benchmark for a growth portfolio, which suggests effective asset selection. However, the maximum drawdown of -35.06% highlights potential volatility, which is a common trait in growth-focused investments. While historical performance is a useful indicator, it is crucial to remember that it does not guarantee future results. Investors should consider this volatility when assessing their risk tolerance and potential future scenarios.

Projection Info

The forward projection, based on a Monte Carlo simulation of 1,000 scenarios, shows a median expected return of 394.21%. This simulation uses historical data to predict a range of potential outcomes, with the 5th percentile at 17.32% and the 67th percentile at 616.11%. While these projections are informative, they are not predictive and should be viewed as one of many tools in decision-making. Investors should remain aware that such analyses are based on past data and assumptions, which may not fully capture future market dynamics.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly invested in stocks, accounting for over 99% of the allocation, with negligible amounts in cash and other categories. This heavy reliance on equities is typical for a growth profile, which seeks higher returns through appreciation. While this can lead to significant gains during bullish market conditions, it also increases exposure to market volatility. To mitigate risk, consider introducing a small allocation to fixed-income or alternative investments, which can provide a buffer against market downturns and add to overall diversification.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

The sector allocation is led by technology at 26.40%, followed by financial services and consumer cyclicals. This sector composition mirrors common benchmarks, indicating a balanced approach to sector exposure. However, the tech-heavy allocation could lead to increased volatility, especially during periods of regulatory scrutiny or interest rate changes. Investors should monitor sector trends and remain flexible to adjust allocations as needed. Ensuring a balance across sectors can help manage risks and take advantage of sector-specific growth opportunities.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily concentrated in North America, with 81% exposure, followed by smaller allocations to Europe and Asia. This North American focus aligns with the portfolio's composition but may limit diversification benefits. Exposure to emerging markets is minimal, which could mean missing out on growth opportunities in these regions. To enhance geographic diversification, consider increasing exposure to underrepresented regions. This can help mitigate regional risks and provide a broader base for potential returns.

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, which helps identify the best possible risk-return ratio based on current allocations. This concept involves adjusting the weights of the existing assets to achieve the highest expected return for a given level of risk. However, it's important to note that such optimization focuses on the current asset mix and does not account for broader diversification goals. Investors should consider their personal risk tolerance and investment objectives when evaluating any rebalancing strategies.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.75%

The portfolio offers a total dividend yield of 1.75%, with the Vanguard Total International Stock Index Fund ETF contributing the highest yield at 3.4%. Dividends can provide a steady income stream and help cushion against volatility. For growth-focused investors, dividends are a secondary consideration, but they can still enhance total returns. If income generation is a priority, consider increasing allocations to higher-yielding assets. This can provide a balance between growth and income, offering a more stable return profile in fluctuating markets.

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) 0.06%

The portfolio's total expense ratio (TER) is impressively low at 0.06%, which is beneficial for long-term performance. Lower costs mean more of the investment returns are retained by the investor, aligning well with best practices for cost efficiency. The Vanguard S&P 500 ETF, with a TER of 0.03%, exemplifies this low-cost approach. Maintaining low costs should remain a priority, and investors should periodically review their portfolio to identify any opportunities to reduce fees further. This can involve comparing alternative funds or ETFs with similar objectives and lower expenses.

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