A growth-focused US-centric portfolio with high tech exposure and moderate diversification

Report created on Jan 17, 2025

Risk profile Info

5/7
Growth
← Less risk More risk →

Diversification profile Info

1/5
Single-Focused
← Less diversification More diversification →

Positions

The portfolio is heavily weighted towards equities, with a significant 45% allocation to the Vanguard S&P 500 ETF. This suggests a strong focus on large-cap US stocks. The inclusion of Vanguard Total Bond Market Index Fund ETF Shares at 10% provides some balance but is relatively low compared to a typical balanced portfolio, which might have around 30-40% in bonds. This composition indicates a growth-oriented strategy with a higher risk tolerance. To enhance diversification, consider increasing allocations to underrepresented asset classes like international equities or bonds, which could provide more stability during market downturns.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 9.8%, reflecting solid growth over time. However, it has also experienced a maximum drawdown of -30.06%, indicating significant volatility. A drawdown is the peak-to-trough decline during a specific period, showing the potential risk of loss. This performance aligns with a growth-focused approach, but it highlights the need for investors to be prepared for potential downturns. To mitigate risk, consider diversifying further or incorporating more defensive assets that can buffer against large drawdowns.

Projection Info

The Monte Carlo simulation, using historical data, projects potential future outcomes for the portfolio. With 1,000 simulations, the median (50th percentile) scenario suggests a 77.05% increase in value, while the worst-case (5th percentile) scenario shows a potential -73.24% loss. These projections highlight the uncertainty inherent in investing and underline the importance of diversification to manage risk. While simulations provide insights, they do not guarantee future results. Consider adjusting your asset allocation to improve the likelihood of achieving desired outcomes while managing potential losses.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%

The portfolio is predominantly equity-based, with nearly 90% in stocks and only about 10% in bonds. This skew towards equities supports a growth-oriented strategy but may expose the portfolio to higher volatility. A more balanced allocation might include a greater proportion of bonds or alternative asset classes, which can provide income and reduce overall risk. Comparing this allocation to a benchmark, such as a 60/40 stock-bond split, reveals a more aggressive stance. Consider increasing exposure to bonds or other asset classes to enhance diversification and stability.

Sectors Info

  • Technology
    32%
  • Financials
    18%
  • Consumer Discretionary
    7%
  • Industrials
    7%
  • Health Care
    7%
  • Telecommunications
    5%
  • Consumer Staples
    4%
  • Energy
    4%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%
  • Consumer Discretionary
    1%

Technology dominates the sector allocation at 32%, indicating a strong concentration in this area. While technology has driven significant returns historically, it is also susceptible to market fluctuations, particularly during interest rate changes. Other sectors, like financial services and consumer cyclicals, also have notable allocations but are less dominant. This concentration in tech could lead to increased volatility. To balance risk, consider diversifying across more sectors, potentially increasing exposure to defensive industries like healthcare or consumer staples, which can perform well in various economic conditions.

Regions Info

  • North America
    87%
  • Europe Developed
    2%
  • Asia Emerging
    1%

The portfolio is heavily concentrated in North America, with 86.69% exposure, indicating limited geographic diversification. This exposes the portfolio to regional risks, such as economic downturns or policy changes in the US. A more globally diversified portfolio might include greater allocations to Europe, Asia, or emerging markets, which can offer growth opportunities and reduce region-specific risks. Comparing this to a global benchmark, which typically includes more international exposure, suggests room for improvement. Consider increasing geographic diversification to mitigate risk and capture growth in other regions.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes highly correlated assets, such as the Vanguard Total Stock Market Index Fund ETF Shares and the Vanguard S&P 500 ETF. Correlation measures how assets move in relation to each other; high correlation means they tend to move together, reducing diversification benefits. In market downturns, these assets may not provide the desired risk mitigation. To enhance diversification, consider replacing one of these ETFs with an asset that has a lower correlation to the existing portfolio, such as international stocks or bonds, which can help spread risk more effectively.

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 benefit from optimization using the Efficient Frontier, which aims to achieve the best possible risk-return ratio based on current assets. This involves adjusting allocations to maximize returns for a given level of risk. The presence of highly correlated assets suggests potential for improvement by reallocating to less correlated investments, enhancing diversification. While the current portfolio is growth-focused, optimizing for efficiency can help balance risk and return more effectively. Consider re-evaluating asset weights to ensure the portfolio is positioned on the Efficient Frontier.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • VANGUARD EXTENDED MARKET INDEX FUND INSTITUTIONAL PLUS SHARES 0.80%
  • VANGUARD FTSE ALL-WORLD EX-US INDEX FUND INSTITUTIONAL PLUS SHARES 1.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.29%

The portfolio's overall dividend yield is 1.29%, which is relatively modest. Dividends can provide a steady income stream and contribute to total returns, especially during periods of market volatility. The inclusion of the Schwab U.S. Dividend Equity ETF, with a 3.6% yield, helps boost income, but its small allocation limits impact. For investors seeking higher income, consider increasing exposure to dividend-focused assets or funds. This approach can enhance cash flow and provide a buffer against market fluctuations, particularly for those relying on investment income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • iShares Expanded Tech-Software Sector ETF 0.41%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • VANGUARD EXTENDED MARKET INDEX FUND INSTITUTIONAL PLUS SHARES 0.04%
  • VANGUARD FTSE ALL-WORLD EX-US INDEX FUND INSTITUTIONAL PLUS SHARES 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.06%

The total expense ratio (TER) for the portfolio is impressively low at 0.06%, reflecting cost-efficient investments. Low costs are crucial for long-term performance, as they allow more of the portfolio's returns to compound over time. The Vanguard and Schwab ETFs, with their minimal fees, contribute to this efficiency. Keeping costs low is a positive aspect of this portfolio, aligning with best practices in investment management. Continue monitoring fees to ensure they remain competitive, and consider replacing any higher-cost investments with lower-cost alternatives if possible.

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