Balanced Growth Portfolio with Strong Diversification and Moderate Risk for Long-Term Wealth Accumulation

Report created on Dec 5, 2024

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 composed of four ETFs, with the Vanguard S&P 500 ETF holding the largest share at 50%. This provides a solid foundation in large-cap U.S. equities, which are typically stable and offer potential for growth. The Vanguard FTSE Developed Markets ETF at 30% adds exposure to international developed markets, enhancing diversification. Avantis U.S. Small Cap Value ETF, at 10%, introduces a focus on small-cap U.S. stocks, known for their growth potential. The Vanguard FTSE Emerging Markets ETF, also at 10%, provides exposure to high-growth potential regions. This composition reflects a growth-oriented strategy with broad diversification across different markets.

Growth Info

Historically, the portfolio has delivered a commendable CAGR of 14.19%, indicating solid growth over time. However, it has also experienced a significant max drawdown of -35.13%, which suggests periods of high volatility. The fact that 90% of returns are concentrated in just 14 days highlights the importance of staying invested to capture these gains. This performance suggests that while the portfolio has the potential for substantial returns, it also requires a tolerance for volatility. Investors should be prepared for market fluctuations and consider their ability to withstand downturns.

Projection Info

Using a Monte-Carlo simulation, which runs numerous hypothetical scenarios to predict future performance, the portfolio shows promising potential. With a hypothetical initial investment, the simulation indicates a 50th percentile return of 393.5%, suggesting substantial growth opportunities. The 5th percentile return of 7.15% reflects potential downside risks, while the 67th percentile return of 609.53% highlights upside possibilities. With 956 out of 1,000 simulations yielding positive returns, the portfolio's future outlook is optimistic. Investors should be aware of inherent uncertainties and align their expectations with their risk tolerance.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted towards stocks, with 99.19% allocated to equities. This stock-heavy allocation aligns with a growth-focused investment strategy, offering potential for higher returns. However, it also increases exposure to market volatility. The minimal allocation to cash and other assets suggests limited liquidity and diversification across asset classes. To enhance stability, consider incorporating more diverse asset classes, such as bonds, to balance risk and reward. This approach can help mitigate potential downturns and provide a more stable return profile over time.

Sectors Info

  • Technology
    22%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    5%
  • Utilities
    3%
  • Real Estate
    2%

The portfolio is well-diversified across sectors, with technology leading at 22.17%, followed by financial services at 17.76%. This sector allocation provides exposure to both growth and value opportunities. The presence of consumer cyclicals and healthcare sectors adds further balance, capturing different economic cycles. However, sectors like utilities and real estate are underrepresented, which might limit defensive positioning during downturns. To optimize sector diversification, consider adjusting allocations to ensure a balanced exposure across various economic conditions. This can help mitigate sector-specific risks and enhance overall portfolio stability.

Regions Info

  • North America
    63%
  • Europe Developed
    16%
  • Japan
    6%
  • Asia Emerging
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, with 62.82% exposure, providing a strong base in a stable and mature market. The inclusion of Europe Developed (16.15%) and Japan (6.37%) offers additional diversification in developed regions. Emerging markets, though less represented, add growth potential, particularly in Asia Emerging and Latin America. This geographic mix provides a balance between stability and growth. However, consider further diversification to reduce regional concentration risks and capture opportunities in underrepresented areas. A more balanced geographic allocation can enhance resilience against regional economic fluctuations.

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 fine-tuning to enhance performance. By adjusting allocations along the efficient frontier, investors can tailor the portfolio to their risk preference. Moving towards a riskier position could increase potential returns, while a more conservative stance may enhance stability. However, with a well-diversified base, the focus should be on aligning the portfolio with the investor's risk tolerance and financial goals. Before optimizing, consider reviewing asset correlations and sector allocations to ensure a balanced approach that maximizes returns while managing risk effectively.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 1.91%

The portfolio offers a total dividend yield of 1.91%, providing a modest income stream. The Vanguard FTSE Developed Markets ETF contributes the highest yield at 3.0%, followed by the Vanguard FTSE Emerging Markets ETF at 2.6%. While dividends offer a steady income, the portfolio's focus on growth-oriented assets limits the overall yield. Investors seeking higher income may need to adjust allocations to include more dividend-focused investments. Balancing growth and income can enhance the portfolio's ability to meet both capital appreciation and income generation goals over time.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) stands at a low 0.06%, reflecting cost-efficient investment choices. The Vanguard S&P 500 ETF and Vanguard FTSE Developed Markets ETF contribute to this low-cost structure with TERs of 0.03% and 0.05%, respectively. The Avantis U.S. Small Cap Value ETF has a higher cost at 0.25%, which is typical for small-cap investments. Keeping costs low is crucial for maximizing net returns. Investors should continue to monitor expense ratios and consider cost-effective options to ensure that fees do not erode returns over time.

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