A growth-focused portfolio with high North American exposure and moderate sector diversification

Report created on Jan 8, 2025

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 equities, with 70% in the Vanguard S&P 500 ETF, 20% in the Avantis U.S. Equity ETF, and 10% in the Avantis International Equity ETF. This composition leans towards large-cap U.S. stocks, reflecting a growth-oriented strategy. While this allocation can drive growth, it may lack diversification compared to portfolios with broader asset class exposure. For a more balanced approach, consider incorporating other asset classes like bonds or real estate, which can provide stability during market volatility.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 15.88%, which is impressive for a growth-focused strategy. However, it's important to note the significant maximum drawdown of -34.71%, suggesting substantial volatility. This performance aligns with a high-risk, high-reward profile. While past performance is not indicative of future results, understanding these trends can guide expectations. To mitigate risk, consider strategies that reduce volatility, such as diversifying into less correlated assets.

Projection Info

Monte Carlo simulations, which use historical data to project future outcomes, suggest a wide range of potential returns. With a median (50th percentile) projected return of 439.76% and an annualized return of 14.63%, the outlook is optimistic. However, the 5th percentile indicates a potential downside of 51.34%, highlighting the inherent risk. It's crucial to recognize that these projections are based on past data and do not guarantee future performance. Regularly reviewing and adjusting the portfolio can help manage risk and align with changing market conditions.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly composed of stocks, accounting for nearly 100% of the allocation. This lack of diversification across asset classes may increase vulnerability to market fluctuations. While equities offer growth potential, incorporating bonds or other asset classes could provide a buffer during downturns and enhance overall stability. Comparing this to a more balanced benchmark, which typically includes a mix of asset classes, highlights the potential benefits of diversification in managing risk and optimizing returns.

Sectors Info

  • Technology
    29%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio exhibits a notable concentration in technology (28.63%), followed by financial services and consumer cyclicals. This sectoral skew aligns with a growth strategy but may increase volatility, especially during market corrections affecting these industries. A more balanced sector allocation could mitigate risks associated with sector-specific downturns. Consider diversifying into sectors like utilities or real estate, which often provide stability and income, to create a more resilient portfolio.

Regions Info

  • North America
    91%
  • Europe Developed
    6%
  • Japan
    2%
  • Australasia
    1%

Geographically, the portfolio is heavily weighted towards North America, with 90.59% of assets in the region. This concentration offers exposure to the U.S. market's growth potential but limits diversification benefits. Including more international assets could reduce regional risk and capture growth opportunities in emerging markets. Comparing this to a global benchmark, which typically spreads exposure more evenly across regions, highlights the potential benefits of a more geographically diversified approach.

Redundant positions Info

  • Avantis® U.S. Equity ETF
    Vanguard S&P 500 ETF
    High correlation

The portfolio's assets, particularly the Avantis U.S. Equity ETF and Vanguard S&P 500 ETF, are highly correlated. This means they tend to move in tandem, which can limit diversification benefits. During market downturns, such correlation may exacerbate losses. To enhance diversification, consider incorporating less correlated assets that can provide stability and reduce overall portfolio volatility. This strategy can help manage risk and improve long-term 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.

To optimize the portfolio using the Efficient Frontier, focus on adjusting the current asset allocation. The Efficient Frontier represents the best possible risk-return trade-off for a given set of assets. Achieving this optimization involves balancing risk and return without necessarily diversifying more. Consider reducing exposure to highly correlated assets and incorporating a broader range of asset classes to improve the portfolio's efficiency and resilience.

Dividends Info

  • Avantis® International Equity ETF 1.90%
  • Avantis® U.S. Equity ETF 0.90%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.21%

The portfolio's dividend yield is modest at 1.21%, reflecting its growth orientation. While dividends are not the primary focus, they can contribute to total returns and provide a cushion during market downturns. For investors seeking income, increasing exposure to high-dividend-paying assets could enhance yield without sacrificing growth potential. Balancing growth and income can create a more comprehensive investment strategy that supports both capital appreciation and cash flow.

Ongoing product costs Info

  • Avantis® International Equity ETF 0.23%
  • Avantis® U.S. Equity ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.07%

The portfolio boasts impressively low costs, with a Total Expense Ratio (TER) of 0.07%. Low costs are a significant advantage, as they enhance long-term returns by minimizing fees. This cost efficiency aligns well with best practices in portfolio management. To maintain this advantage, continue monitoring expense ratios and consider replacing higher-cost assets with more cost-effective alternatives. This strategy helps maximize net returns and supports the portfolio's growth objectives.

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