Growth-Oriented Portfolio with Strong Historic Returns and Moderate Diversification Across Asset Classes

Report created on Dec 1, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

The portfolio is composed of three ETFs, with a significant focus on large-cap growth stocks, making up 55% of the portfolio. Mid-cap momentum stocks contribute 32.5%, while international small-cap value stocks make up the remaining 12.5%. This composition indicates a strong leaning towards growth and momentum strategies, with a touch of international diversification. The allocation suggests a focus on capital appreciation, which is suitable for investors seeking higher returns over time. However, the limited number of positions may raise concerns about diversification, potentially increasing exposure to market volatility.

Growth Info

Historically, the portfolio has demonstrated impressive performance, with a compound annual growth rate (CAGR) of 20.21%. This high return is accompanied by a maximum drawdown of -34.65%, indicating significant volatility. The portfolio's performance is driven by a few key days, with 90% of returns concentrated in just 21 days. This suggests that while the portfolio can generate substantial gains, it also carries the risk of sharp declines. Investors should be prepared for potential fluctuations and ensure their risk tolerance aligns with this level of volatility.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted for this portfolio. Assuming a hypothetical initial investment, the simulation projected an annualized return of 19.1%. The results showed a wide range of potential outcomes, with the 5th percentile at 123.43% and the 67th percentile at 1,119.49%. With 992 out of 1,000 simulations resulting in positive returns, the portfolio appears to have strong growth potential. However, the variability in outcomes underscores the importance of maintaining a long-term investment horizon to weather potential market fluctuations.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.8% of assets in equities. This allocation aligns with a growth-oriented investment strategy, aiming for capital appreciation. The minimal allocation to cash and bonds suggests a focus on maximizing returns rather than preserving capital or generating income. While this asset class distribution can lead to higher returns, it also increases exposure to market volatility. To manage risk, investors might consider diversifying into other asset classes, such as bonds or cash, to provide a buffer during market downturns.

Sectors Info

  • Technology
    29%
  • Industrials
    15%
  • Consumer Discretionary
    15%
  • Financials
    14%
  • Health Care
    8%
  • Telecommunications
    7%
  • Basic Materials
    4%
  • Consumer Staples
    4%
  • Energy
    3%
  • Real Estate
    1%
  • Utilities
    1%

Sector allocation in the portfolio is concentrated, with technology leading at 28.95%, followed by industrials and consumer cyclicals. This focus on technology and cyclical sectors suggests a strategy aligned with capturing growth in rapidly evolving industries. However, the concentration in a few sectors may expose the portfolio to sector-specific risks, potentially impacting performance if these sectors underperform. To enhance diversification, investors could consider reallocating funds to underrepresented sectors, such as utilities or real estate, to mitigate risk and improve stability during market fluctuations.

Regions Info

  • North America
    56%
  • Europe Developed
    5%
  • Japan
    4%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic allocation is primarily focused on North America, accounting for 56.32% of assets. Other regions, such as Europe Developed and Japan, have minimal representation. This concentration in North America aligns with the portfolio's focus on U.S. large-cap growth and mid-cap momentum stocks. While this regional focus can benefit from strong domestic market performance, it may limit exposure to international growth opportunities. Investors might consider increasing allocations to other regions, such as emerging markets, to enhance diversification and capture potential growth in global markets.

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 that while the portfolio is well-positioned for growth, there's room for optimization. Investors can explore moving along the efficient frontier to achieve a more balanced risk-return profile. For those seeking a riskier portfolio, increasing exposure to growth assets may be beneficial. Conversely, those aiming for a more conservative approach could consider reallocating towards bonds or cash. However, before making changes, investors should assess their risk tolerance and financial goals to ensure any adjustments align with their long-term investment strategy.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Invesco S&P MidCap Momentum ETF 0.30%
  • Weighted yield (per year) 0.70%

The portfolio's dividend yield is relatively low, at 0.7%, with the Avantis® International Small Cap Value ETF contributing the highest yield of 3.1%. This suggests a focus on capital appreciation rather than income generation. While dividends can provide a steady income stream, this portfolio's emphasis on growth stocks may limit dividend payouts. Investors seeking higher income might consider incorporating dividend-focused investments to balance growth with income generation. However, the current yield aligns with the portfolio's growth-oriented strategy, prioritizing capital gains over immediate income.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.18%

The portfolio's total expense ratio (TER) is 0.18%, which is relatively low and suggests cost-efficient management. The Schwab U.S. Large-Cap Growth ETF has the lowest cost at 0.04%, while the Avantis® International Small Cap Value ETF is the most expensive at 0.36%. Keeping costs low is essential for maximizing net returns, as high fees can erode investment gains over time. Investors should continue to monitor expense ratios and seek opportunities to reduce costs further, potentially by exploring alternative investment options with lower fees, to enhance overall portfolio performance.

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