A growth-focused portfolio with a strong US bias and moderate sector diversification

Report created on Jan 2, 2025

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 primarily composed of three Vanguard ETFs, with the Vanguard Total Stock Market Index Fund making up 50% and the Vanguard Growth Index Fund 40%. The remaining 10% is allocated to the Vanguard Total International Stock Index Fund. This structure leans heavily towards US equities, reflecting a common growth-focused strategy. While the portfolio is moderately diversified, it lacks exposure to fixed income or alternative assets, which could provide stability during market downturns. Consider adding different asset types to balance potential volatility and improve diversification.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 14.28%. This suggests strong growth, though it comes with a significant maximum drawdown of -33.44%, indicating vulnerability in volatile markets. The portfolio's performance is comparable to broad market indices during bull markets but may suffer during downturns. It's crucial to remember that past performance doesn't guarantee future results. To mitigate potential drawdowns, consider introducing more defensive assets or strategies.

Projection Info

Monte Carlo simulations, using historical data, predict a wide range of potential outcomes for the portfolio. With a median return of 384.19% and a 67th percentile outcome of 546.64%, the projections suggest robust growth potential. However, there's a 5th percentile outcome of just 52.73%, highlighting the risk of underperformance in adverse conditions. While simulations provide valuable insights, they are not definitive forecasts. To improve potential outcomes, consider rebalancing the portfolio to reduce risk without sacrificing growth.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in equities, accounting for over 99% of the allocation. This concentration in stocks aligns with a growth strategy but limits diversification benefits. By comparison, balanced portfolios typically include bonds and other assets to cushion against market volatility. Introducing fixed income or alternative investments can enhance diversification and potentially reduce risk, creating a more resilient portfolio over various market conditions.

Sectors Info

  • Technology
    36%
  • Consumer Discretionary
    12%
  • Financials
    11%
  • Telecommunications
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Consumer Staples
    4%
  • Energy
    3%
  • Basic Materials
    2%
  • Real Estate
    2%
  • Utilities
    2%

The portfolio's sector allocation is led by technology at 36%, followed by consumer cyclicals and financial services. This tech-heavy focus can drive growth but also increases sensitivity to market shifts, such as interest rate changes. Sector diversification is moderate, with some exposure to defensive sectors like healthcare and consumer defensive. To further balance risk, consider increasing exposure to underrepresented sectors, which can provide stability when cyclical sectors face downturns.

Regions Info

  • North America
    91%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly invested in North America, with 90.5% exposure. This focus on the US market can drive growth but limits international diversification. Comparatively, global benchmarks typically have more balanced regional allocations. To mitigate regional risk and capture international growth opportunities, consider increasing exposure to emerging markets or other developed regions. This could enhance diversification and provide a buffer against US market-specific risks.

Redundant positions Info

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

The portfolio's assets show high correlation, particularly between the Vanguard Growth Index Fund and the Vanguard Total Stock Market Index Fund. This correlation suggests limited diversification benefits, as these assets tend to move together in response to market events. During downturns, highly correlated assets may exacerbate losses. To improve diversification, consider replacing or reducing exposure to overlapping assets with those that have lower correlations, potentially smoothing portfolio volatility.

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's current allocation could be optimized using the Efficient Frontier, which seeks to achieve the best possible risk-return ratio. However, the presence of highly correlated assets limits diversification benefits. Before optimizing, consider reducing these overlaps to enhance diversification. The Efficient Frontier can then be used to adjust allocations among remaining assets, potentially achieving a more efficient balance between risk and return without necessarily adding new investments.

Dividends Info

  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Growth Index Fund ETF Shares 0.50%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 1.19%

The portfolio's dividend yield stands at 1.19%, with contributions from all three ETFs. While dividends are not the primary focus of a growth portfolio, they can provide a steady income stream, especially during periods of market volatility. The Vanguard Total International Stock Index Fund offers the highest yield, enhancing the portfolio's overall income potential. Consider whether increasing dividend-focused assets aligns with your investment goals, as this could offer additional income stability.

Ongoing product costs Info

  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Growth Index Fund ETF Shares 0.04%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.04%

The portfolio's total expense ratio (TER) is impressively low at 0.04%, reflecting the cost efficiency of Vanguard ETFs. Low costs are beneficial as they help maximize net returns over time. This cost structure is well-aligned with best practices for minimizing fees, ensuring more of the portfolio's returns are retained. Maintaining a focus on low-cost investments can significantly enhance long-term performance, especially when compounded over extended investment horizons.

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