Balanced Growth Portfolio with Strong U.S. Focus and Moderate Diversification for Risk-Tolerant Investors
Report created on Nov 30, 2024Risk profile
5/7
Diversification profile
3/5
Positions
-
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 50.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 30.00% -
XM Invesco S&P MidCap Quality ETF
XMHQ - US46137V4721 8.00% -
VE Vanguard FTSE Developed Markets Index Fund ETF Shares
VEA - US9219438580 6.00% -
VW Vanguard FTSE Emerging Markets Index Fund ETF Shares
VWO - US9220428588 6.00%
The portfolio is composed of five ETFs, with a significant concentration in the Schwab U.S. Large-Cap Growth ETF at 50%. This allocation indicates a strong focus on large-cap growth stocks, which often offer potential for high returns but can also be volatile. The Avantis U.S. Small Cap Value ETF makes up 30% of the portfolio, adding exposure to small-cap value stocks, which can provide diversification benefits and potential for outsized gains during economic recoveries. The remaining 20% is split among mid-cap, developed, and emerging markets ETFs, providing some international exposure. This composition suggests a growth-oriented strategy with moderate diversification.
Growth
Historically, the portfolio has delivered an impressive CAGR of 19.91%, indicating strong performance over time. However, it has also experienced a maximum drawdown of -36.62%, highlighting potential volatility and risk. This mix of high returns and significant drawdowns is typical for growth-oriented portfolios. The concentration in U.S. large-cap and small-cap stocks has likely contributed to the strong performance. However, the volatility suggests that investors should be prepared for fluctuations in value, particularly during market downturns. Maintaining a long-term perspective is crucial to weathering these periods of volatility.
Projection
Using a Monte Carlo simulation with 1,000 runs, we see a wide range of potential future outcomes for a hypothetical investment. The median projection shows a robust 534.42% return, while the 5th percentile suggests a more modest 37.69% gain. The simulation's annualized return of 17.41% aligns with the portfolio's growth focus, but the variability underscores the importance of understanding and managing risk. Investors should be aware that while the potential for high returns exists, there are also scenarios with less favorable outcomes. This forward-looking analysis reinforces the need for a risk tolerance that matches the portfolio's characteristics.
Asset classes
- Stocks 100%
The portfolio is heavily weighted towards stocks, with 99.63% allocated to equities. This high equity exposure is typical for growth-oriented portfolios, which aim to maximize returns over the long term. While equities offer the potential for significant appreciation, they also come with higher volatility compared to other asset classes like bonds or cash. The small cash allocation provides minimal liquidity, which might not be sufficient for short-term needs. Investors should ensure they are comfortable with this level of risk and consider their investment horizon. Diversifying into other asset classes could help mitigate risk and provide more stability.
Sectors
- Technology 29%
- Financials 16%
- Consumer Discretionary 13%
- Industrials 12%
- Health Care 8%
- Telecommunications 7%
- Energy 6%
- Basic Materials 4%
- Consumer Staples 3%
- Real Estate 1%
- Utilities 1%
The sector allocation is dominated by technology at 29.09%, followed by financial services and consumer cyclicals. This concentration in technology reflects its significant role in driving growth in recent years. However, it also exposes the portfolio to sector-specific risks, such as regulatory changes or technological disruptions. While the variety of sectors provides some diversification, the heavy emphasis on a few sectors could lead to increased volatility. To enhance stability, investors might consider a more balanced sector distribution. This could help cushion the portfolio against sector-specific downturns and provide more consistent performance.
Regions
- North America 88%
- Asia Emerging 4%
- Europe Developed 3%
- Asia Developed 2%
- Japan 1%
- Latin America 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily skewed towards North America, with 87.79% of assets allocated there. This strong U.S. focus reflects the dominance of U.S. markets in global finance but also limits exposure to international growth opportunities. While the portfolio includes small allocations to emerging markets and developed regions outside the U.S., these are relatively minor. A more globally diversified portfolio could reduce regional risk and tap into growth in other parts of the world. Investors should consider their views on global economic trends and the potential benefits of increased international diversification.
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 optimization chart suggests potential for improvement by adjusting along the efficient frontier. To achieve a riskier portfolio, consider increasing the allocation to high-growth sectors or regions. Conversely, for a more conservative approach, diversifying into bonds or other low-volatility assets could help. However, given the current composition, focusing first on enhancing diversification might be more beneficial. This could involve balancing sector weights and increasing international exposure. By optimizing along the efficient frontier, investors can better align their portfolios with their risk tolerance and financial objectives, potentially improving risk-adjusted returns.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.50%
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
- Invesco S&P MidCap Quality ETF 4.70%
- Weighted yield (per year) 1.37%
The portfolio's dividend yield stands at 1.37%, with the Invesco S&P MidCap Quality ETF contributing significantly at 4.7%. While not a primary focus for growth portfolios, dividends can provide a steady income stream and help cushion against market downturns. The relatively low yield reflects the growth orientation, where companies often reinvest profits rather than distributing them. Investors seeking income might consider increasing exposure to dividend-paying assets. However, this should be balanced with the growth objectives to ensure the portfolio remains aligned with the investor's goals and risk tolerance.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
- Invesco S&P MidCap Quality ETF 0.25%
- Weighted costs total (per year) 0.12%
The portfolio's total expense ratio of 0.12% is quite competitive, reflecting the low-cost nature of ETFs. This cost efficiency is beneficial for long-term growth, as lower fees can significantly enhance returns over time. The expense ratios of individual ETFs range from 0.04% to 0.25%, with the Schwab U.S. Large-Cap Growth ETF being the most cost-effective. Keeping investment costs low is a crucial aspect of portfolio management, as it directly impacts net returns. Investors should continue to monitor fees and consider cost-effective alternatives if necessary to maintain the portfolio's performance.
What next?
Ready to invest in this portfolio?
Select a broker that fits your needs and watch for low fees to maximize your returns.
Create your own report?
Join our community!
Compare your holdings
How much do the funds you hold actually overlap with the ones people weigh them against?
The information provided on this platform is for informational purposes only and should not be considered as financial or investment advice. Insightfolio does not provide investment advice, personalized recommendations, or guidance regarding the purchase, holding, or sale of financial assets. The tools and content are intended for educational purposes only and are not tailored to individual circumstances, financial needs, or objectives.
Insightfolio assumes no liability for the accuracy, completeness, or reliability of the information presented. Users are solely responsible for verifying the information and making independent decisions based on their own research and careful consideration. Use of the platform should not replace consultation with qualified financial professionals.
Investments involve risks. Users should be aware that the value of investments may fluctuate and that past performance is not an indicator of future results. Investment decisions should be based on personal financial goals, risk tolerance, and independent evaluation of relevant information.
Insightfolio does not endorse or guarantee the suitability of any particular financial product, security, or strategy. Any projections, forecasts, or hypothetical scenarios presented on the platform are for illustrative purposes only and are not guarantees of future outcomes.
By accessing the services, information, or content offered by Insightfolio, users acknowledge and agree to these terms of the disclaimer. If you do not agree to these terms, please do not use our platform.
Instrument logos provided by Elbstream.
Help us improve Insightfolio
Your feedback makes a difference! Share your thoughts in our quick survey. Take the survey