Balanced Growth Portfolio with Strong Global Diversification and Moderate Risk for Long-Term Returns

Report created on Jul 10, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of three ETFs, with Vanguard Total World Stock Index Fund ETF Shares making up 55%, Vanguard Growth Index Fund ETF Shares 30%, and Avantis® U.S. Small Cap Value ETF 15%. This allocation indicates a focus on growth, with a significant portion of assets invested in global equities. The portfolio is broadly diversified, but its heavy weighting in stocks suggests a higher risk tolerance. This setup is suitable for investors seeking long-term capital appreciation with a moderate level of risk.

Growth Info

Historically, this portfolio has shown a strong performance with a compound annual growth rate (CAGR) of 16.59%. However, it also experienced a maximum drawdown of -35.04%, highlighting the volatility inherent in growth-focused investments. The portfolio's returns are concentrated over just 17 days, indicating that timing can significantly impact performance. This historical data suggests that while the portfolio can provide substantial returns, investors should be prepared for periods of significant volatility.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows a promising forward projection. Assuming a hypothetical initial investment, the 5th percentile projects a return of 59.03%, while the median (50th percentile) projects 691.71%, and the 67th percentile reaches 1,084.24%. Such simulations provide a range of potential outcomes, illustrating the uncertainty and variability in future returns. The annualized return across all simulations is 19.01%, indicating strong potential growth, but investors should remain aware of the inherent risks.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, accounting for 99.5% of assets, with minimal allocations to cash and other categories. This high equity exposure aligns with a growth-oriented strategy, aiming for capital appreciation. While this can offer substantial returns, it also introduces significant volatility. Investors might consider diversifying into other asset classes like bonds or real estate to reduce risk and provide stability during market downturns.

Sectors Info

  • Technology
    29%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Industrials
    10%
  • Telecommunications
    8%
  • Health Care
    8%
  • Energy
    5%
  • Consumer Staples
    5%
  • Basic Materials
    4%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation is diverse, with significant exposure to Technology (29.23%), Financial Services (14.87%), and Consumer Cyclicals (12.45%). This diversification across sectors helps mitigate risks associated with any single industry. However, the heavy concentration in Technology might increase volatility, given the sector's susceptibility to rapid changes. Balancing sector allocation could enhance the portfolio's resilience against sector-specific downturns.

Regions Info

  • North America
    80%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is predominantly allocated in North America (80.26%), with smaller allocations in Europe Developed (8.19%) and Asia Emerging (3.49%). This concentration in North America reflects a focus on stable, developed markets, which can offer growth opportunities but may limit exposure to faster-growing regions. Diversifying geographically could provide access to emerging market growth while reducing regional risk exposure.

Redundant positions Info

  • Vanguard Total World Stock Index Fund ETF Shares
    Vanguard Growth Index Fund ETF Shares
    High correlation

The portfolio exhibits high correlation between Vanguard Total World Stock Index Fund ETF Shares and Vanguard Growth Index Fund ETF Shares. This correlation suggests that these assets tend to move in tandem, which might limit diversification benefits. While correlated assets can enhance returns during market upswings, they can also amplify losses during downturns. Introducing assets with lower correlation might improve the portfolio's risk-adjusted 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.

Portfolio optimization is not recommended due to the high correlation between existing assets. Instead, focus on maintaining a balanced risk-reward profile by considering diversification into less correlated assets. Adjusting the portfolio along the efficient frontier can help achieve a more conservative or riskier stance. For a riskier portfolio, increase allocation to equities, while for a conservative approach, consider incorporating bonds or other low-volatility assets. Prioritize alignment with personal risk tolerance and financial goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Weighted yield (per year) 1.36%

The portfolio's dividend yield stands at 1.36%, with contributions from Avantis® U.S. Small Cap Value ETF (1.5%), Vanguard Total World Stock Index Fund ETF Shares (1.8%), and Vanguard Growth Index Fund ETF Shares (0.5%). While the yield is modest, it provides some income to offset volatility. Investors seeking higher income might explore increasing allocations to dividend-focused assets, but should balance this with their growth objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Weighted costs total (per year) 0.09%

The portfolio's total expense ratio (TER) is 0.09%, with Vanguard Growth Index Fund ETF Shares having the lowest cost at 0.04%. This low-cost structure is advantageous, as it minimizes the drag on returns. Keeping investment costs low is crucial for long-term growth, allowing more of the portfolio's returns to compound over time. Investors should continue to monitor expense ratios to ensure they remain competitive and aligned with their investment strategy.

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