Growth-Oriented Portfolio with Strong Diversification and Low Costs for Risk-Tolerant Investors

Report created on Nov 25, 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 three ETFs with a focus on growth. The largest holding, Vanguard Total Stock Market Index Fund ETF Shares, makes up 60% of the portfolio, providing broad exposure to the U.S. stock market. The Vanguard Total International Stock Index Fund ETF Shares represents 25%, adding international diversification. The Avantis® U.S. Small Cap Value ETF comprises 15%, introducing a tilt towards smaller, value-oriented U.S. companies. This composition indicates a strong emphasis on growth through equities, with a balanced approach to domestic and international markets. To optimize, consider reviewing the balance between U.S. and international exposure.

Growth Info

Historically, the portfolio has shown impressive performance, with a compound annual growth rate (CAGR) of 15.31%. However, it also experienced a significant maximum drawdown of -36.24%, highlighting potential volatility. The portfolio's returns are concentrated, with 90% of returns occurring on just 16 days. This performance suggests a high-risk, high-reward strategy. To mitigate potential volatility, consider strategies to smooth out returns, such as diversifying across different asset classes or incorporating more stable investments.

Projection Info

The forward projection using a Monte-Carlo simulation, which models potential outcomes based on historical data, shows promising results. With a hypothetical initial investment, the simulations indicate a 50th percentile return of 555.36% and an annualized return of 16.62%. Notably, 982 out of 1,000 simulations yielded positive returns. This suggests a favorable outlook, but it's important to be prepared for variability. To enhance predictability, consider strategies that could reduce the range of potential outcomes, such as increasing exposure to less volatile assets.

Asset classes Info

  • Stocks
    99%

The portfolio is heavily weighted towards stocks, with 99.48% in equities, while cash and other assets make up a minor portion. This asset class allocation aligns with a growth-oriented strategy, prioritizing capital appreciation. However, the lack of diversification into other asset classes like bonds could expose the portfolio to higher risk during market downturns. To achieve a more balanced risk profile, consider incorporating fixed-income securities or other asset classes that may provide stability and income.

Sectors Info

  • Technology
    23%
  • Financials
    18%
  • Industrials
    12%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    7%
  • Consumer Staples
    6%
  • Energy
    6%
  • Basic Materials
    4%
  • Real Estate
    3%
  • Utilities
    2%

The portfolio is diversified across various sectors, with significant allocations to Technology (22.66%), Financial Services (17.58%), and Industrials (11.96%). This sector allocation suggests a focus on growth sectors, which can drive returns but also introduce sector-specific risks. The exposure to multiple sectors is a positive aspect, providing some level of diversification. However, to further mitigate sector risks, consider regularly reviewing sector allocations and adjusting as necessary to maintain a balanced exposure.

Regions Info

  • North America
    76%
  • Europe Developed
    10%
  • Asia Emerging
    4%
  • Japan
    4%
  • Asia Developed
    3%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio is predominantly focused on North America, which accounts for 76.34% of the allocation. This regional concentration provides strong exposure to the U.S. market but may limit potential growth opportunities abroad. The remaining allocation is split across Europe Developed, Asia Emerging, and other regions, offering some international diversification. To enhance global diversification, consider gradually increasing exposure to emerging markets or regions with growth potential, while being mindful of associated risks.

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 moving along the efficient frontier. Investors can achieve a riskier portfolio by increasing exposure to high-growth sectors or regions, while a more conservative approach could involve adding fixed-income assets to reduce volatility. Given the current composition, focusing on further diversification across asset classes may offer better risk-adjusted returns. Before optimizing, ensure the portfolio aligns with your financial goals and risk tolerance, as these factors are crucial in determining the appropriate strategy.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.00%
  • Weighted yield (per year) 1.76%

The portfolio offers a modest dividend yield of 1.76%, with contributions from all three ETFs. The Vanguard Total International Stock Index Fund ETF Shares provides the highest yield at 3.0%, while the Avantis® U.S. Small Cap Value ETF and Vanguard Total Stock Market Index Fund ETF Shares yield 1.5% and 1.3%, respectively. While not the primary focus, dividends contribute to total returns and provide some income. To enhance income generation, consider increasing allocations to higher-yielding assets, while balancing the need for growth.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio benefits from low costs, with a total expense ratio (TER) of 0.08%. The Vanguard ETFs have particularly low expense ratios, contributing to cost-efficiency. This cost structure is advantageous, as lower costs can significantly enhance long-term returns. The Avantis® U.S. Small Cap Value ETF has a slightly higher expense ratio of 0.25%, but it remains reasonable within the context of the portfolio. To maintain cost-efficiency, continue prioritizing low-cost investment options and regularly review expense ratios.

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