A balanced portfolio with strong diversification and focus on value and growth equities

Report created on Dec 25, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is composed primarily of ETFs, with a significant focus on U.S. large-cap growth and value equities. Notably, the Schwab U.S. Large-Cap Growth ETF holds the largest position at 30%. The remaining assets are distributed among small and mid-cap value ETFs, both domestically and internationally. This composition reflects a balanced approach, aligning with common benchmarks for a diversified portfolio. However, the high allocation to U.S. equities may limit exposure to international growth opportunities. Consider adjusting the asset mix to incorporate more diverse international holdings for enhanced global reach.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 10.13%, outperforming many standard benchmarks. However, it also experienced a significant maximum drawdown of -24.91%, indicating vulnerability during market downturns. This performance suggests that while the portfolio is capable of generating high returns, it carries a certain level of risk. To manage this, consider strategies that can mitigate drawdowns, such as incorporating assets with lower volatility or diversifying into bonds or other asset classes.

Projection Info

The Monte Carlo simulation, which uses historical data to predict future performance, suggests a median (50th percentile) portfolio growth of 166.18%. However, the 5th percentile indicates a potential loss of -17.16%, showcasing the inherent uncertainty in projections. While simulations offer valuable insights, they are based on past data and cannot guarantee future outcomes. To prepare for varying market conditions, consider stress-testing the portfolio against different scenarios and adjusting allocations to enhance resilience.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with over 99% in equities and negligible allocations in cash and bonds. This concentration aligns with a growth-focused strategy but may expose the portfolio to higher volatility. In comparison, balanced benchmarks typically include a mix of bonds to cushion against stock market fluctuations. To enhance stability, consider introducing more fixed-income assets, which can provide steady income and reduce overall portfolio risk.

Sectors Info

  • Technology
    20%
  • Financials
    18%
  • Consumer Discretionary
    15%
  • Industrials
    13%
  • Basic Materials
    7%
  • Telecommunications
    7%
  • Energy
    6%
  • Health Care
    6%
  • Consumer Staples
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is diversified across several sectors, with notable allocations in technology, financial services, and consumer cyclicals. This sectoral balance is comparable to common benchmarks, indicating a well-rounded approach. However, the technology sector's 20.2% weight suggests a potential for higher volatility, especially during economic shifts or interest rate changes. To mitigate sector-specific risks, consider periodically reviewing and rebalancing sector allocations to maintain alignment with broader market trends.

Regions Info

  • North America
    62%
  • Europe Developed
    10%
  • Asia Emerging
    9%
  • Asia Developed
    7%
  • Japan
    5%
  • Africa/Middle East
    2%
  • Latin America
    2%
  • Australasia
    2%
  • Europe Emerging
    1%

Geographically, the portfolio is predominantly exposed to North America, representing 61.8% of the holdings. While this aligns with many U.S.-centric benchmarks, it limits exposure to emerging markets and other regions. The current allocation provides stability but may miss out on growth opportunities in underrepresented areas. To enhance geographic diversification, consider increasing investments in emerging markets or other regions with strong growth potential, balancing risk and opportunity.

Redundant positions Info

  • Avantis® International Small Cap Value ETF
    Avantis International Large Cap
    High correlation
  • Avantis® U.S. Small Cap Value ETF
    SPDR® S&P 400 Mid Cap Value ETF
    High correlation

The portfolio contains highly correlated assets, particularly among value ETFs from Avantis and SPDR. High correlation means these assets tend to move together, reducing diversification benefits. While correlated assets can enhance returns during market upswings, they may also amplify losses during downturns. To improve diversification, consider replacing some correlated holdings with assets that have lower correlation, thereby spreading risk more effectively across different market conditions.

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.

Before optimizing the portfolio using the Efficient Frontier, focus on reducing asset overlap to enhance diversification. The Efficient Frontier is a tool that helps identify the best risk-return balance, but it relies on the current asset mix. By minimizing correlated assets, you can create a more efficient portfolio that maximizes returns for a given level of risk. This approach ensures that the portfolio remains well-positioned to adapt to changing market conditions while optimizing performance.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® Emerging Markets Value ETF 1.00%
  • Avantis International Large Cap 2.20%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 1.10%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • WisdomTree Emerging Markets SmallCap Dividend Fund 2.70%
  • SPDR® S&P 400 Mid Cap Value ETF 1.30%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Weighted yield (per year) 1.54%

With a total dividend yield of 1.54%, the portfolio provides moderate income, primarily from international and small-cap value ETFs. Dividends can be a valuable source of return, especially in volatile markets. However, the yield is relatively low compared to income-focused portfolios. If income generation is a priority, consider reallocating some assets towards higher-dividend-paying sectors or funds, while maintaining a balance with growth-oriented investments to sustain overall performance.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis International Large Cap 0.25%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • WisdomTree Emerging Markets SmallCap Dividend Fund 0.58%
  • SPDR® S&P 400 Mid Cap Value ETF 0.15%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Weighted costs total (per year) 0.22%

The portfolio's total expense ratio (TER) is 0.22%, which is commendably low. This cost efficiency supports better long-term returns by minimizing the drag of fees on overall performance. Notably, the Schwab U.S. Large-Cap Growth ETF contributes significantly to this low TER. To maintain cost-effectiveness, regularly review the expense ratios of all holdings and consider replacing higher-cost funds with lower-cost alternatives, ensuring that the portfolio remains competitive in terms of fees.

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