A growth-focused portfolio with strong US equity exposure and moderate sector diversification

Report created on Dec 6, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards equities, with a significant 55% allocation in the Vanguard S&P 500 ETF. It includes a mix of domestic and international stocks, small-cap value stocks, and a modest bond allocation. The equity-heavy nature aligns with a growth-focused strategy, aiming to capture capital appreciation over time. The inclusion of bonds provides some degree of risk mitigation, although it remains limited. Diversification across asset types is broad, yet heavily skewed towards equities, which can increase potential returns but also amplify volatility. Consider balancing this with more bonds if stability is a priority.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 15.48%. However, it experienced a significant maximum drawdown of -31.85%, indicating vulnerability during market downturns. This performance suggests that while the portfolio has been successful in capturing market upswings, it can be susceptible to losses during volatile periods. Investors should be aware that past performance does not guarantee future results and should consider their risk tolerance when evaluating such historical data.

Projection Info

The Monte Carlo simulation, which uses historical data to forecast potential future outcomes, suggests a wide range of possible returns. With 1,000 simulations, the portfolio shows a 5th percentile return of 44.29% and a 67th percentile return of 707.69%. This indicates that while there is potential for significant growth, there is also a possibility of lower returns. The simulation highlights the uncertainty inherent in investing and underscores the importance of aligning investment strategies with personal risk tolerance and long-term goals.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%

The portfolio's asset allocation is predominantly in stocks, comprising approximately 89.68%, with a minor allocation to bonds at 9.89%. This heavy stock allocation aligns with a growth strategy but may expose the investor to higher volatility. Bonds provide a cushion against market downturns, although their impact is limited due to their small proportion. To enhance diversification and potentially reduce risk, consider increasing the bond allocation or introducing other asset classes like real estate or commodities.

Sectors Info

  • Technology
    31%
  • Financials
    13%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Health Care
    8%
  • Telecommunications
    6%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is concentrated, with a notable 30.67% in technology, followed by financial services and consumer cyclicals. This concentration in technology reflects a bet on the sector's growth prospects but could increase vulnerability to sector-specific risks. While other sectors like healthcare and industrials provide some diversity, the portfolio might benefit from more balanced sector exposure. Diversifying further into underrepresented sectors could help mitigate risk and enhance stability.

Regions Info

  • North America
    76%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily skewed towards North America, which accounts for 75.53% of the allocation. This concentration could expose the portfolio to regional economic and political risks. Although there is some international exposure, particularly in developed Europe and Asia, the overall geographic diversification is limited. Expanding exposure to emerging markets or other regions could provide additional growth opportunities and reduce reliance on North American 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 can potentially be optimized using the Efficient Frontier, which seeks to maximize returns for a given level of risk. By adjusting the allocation among existing assets, investors can aim for a more favorable risk-return ratio. This doesn't necessarily mean adding new assets, but rather reallocating within the current holdings. Achieving an optimal balance can help in maintaining desired growth while managing risk more effectively, aligning with individual investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.60%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.66%

The portfolio yields an average dividend of 1.66%, with the Vanguard Total Bond Market Index Fund contributing the highest yield at 3.6%. Dividends can provide a steady income stream, which is beneficial for reinvestment or income generation. However, the overall yield is relatively modest, reflecting the growth-focused strategy. Investors prioritizing income might consider reallocating to higher-yielding assets or funds, although this may come at the expense of growth potential.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.07%

The portfolio's total expense ratio (TER) is 0.07%, which is relatively low and advantageous for long-term investors. Lower costs mean more of the returns are retained, enhancing compounding over time. The Avantis® U.S. Small Cap Value ETF has the highest expense ratio at 0.25%, which could be reevaluated if cost reduction is a priority. Regularly reviewing and minimizing costs can significantly improve net returns, especially over extended investment horizons.

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