A highly diversified portfolio with balanced risk and a focus on global equity exposure

Report created on Jan 2, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

The portfolio is evenly split across ten ETFs, each representing 10% of the total allocation. This balanced approach ensures no single asset dominates, leading to a well-rounded exposure. Compared to typical portfolios, which often favor domestic equities or bonds, this portfolio's composition is notably diversified. Such a structure can help mitigate risk by spreading investments across various markets and sectors. However, the absence of significant bond allocation might reduce stability during market downturns. Consider incorporating more fixed-income assets to enhance resilience.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 5.85%, indicating moderate growth over time. This performance aligns well with balanced portfolios, which typically aim for steady, albeit not spectacular, returns. The maximum drawdown of -23.64% suggests vulnerability during market downturns, which is expected given the high equity exposure. While past performance can guide expectations, it does not guarantee future results. To improve resilience, consider diversifying further into asset classes less correlated with equities.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates an annualized return of 6.0%. This suggests potential for reasonable growth, with 813 out of 1,000 simulations resulting in positive returns. However, the 5th percentile projection of -38.44% highlights possible risks. Although simulations provide insights, they are not foolproof predictors due to reliance on past data. Regularly reviewing and adjusting the portfolio based on changing market conditions can help mitigate risks and seize opportunities.

Asset classes Info

  • Stocks
    90%
  • Real Estate
    10%

The portfolio is heavily weighted towards stocks, accounting for nearly 90% of the allocation, with minimal exposure to bonds and other asset classes. While the stock focus can drive growth, it may also increase volatility. Compared to a typical balanced portfolio, which often includes a higher bond allocation, this portfolio might benefit from further diversification. Introducing more bonds or alternative investments could provide stability and reduce the impact of stock market fluctuations.

Sectors Info

  • Financials
    19%
  • Industrials
    14%
  • Real Estate
    13%
  • Consumer Discretionary
    12%
  • Technology
    9%
  • Basic Materials
    7%
  • Health Care
    7%
  • Energy
    6%
  • Consumer Staples
    6%
  • Telecommunications
    4%
  • Utilities
    2%

Sector allocation is diverse, with financial services, industrials, and real estate leading the way. This variety mirrors common benchmarks, suggesting a well-diversified approach. However, technology, a significant growth driver, is underrepresented compared to market norms. While current allocations may mitigate sector-specific risks, consider adjusting weights to capture emerging trends. For example, increasing technology exposure could enhance growth potential, but be mindful of potential volatility associated with such adjustments.

Regions Info

  • North America
    53%
  • Europe Developed
    15%
  • Asia Emerging
    10%
  • Asia Developed
    8%
  • Japan
    8%
  • Australasia
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%
  • Europe Emerging
    1%

Geographically, the portfolio is well-diversified, with significant exposure to North America, Europe, and Asia. This distribution aligns with global benchmarks, offering a balanced risk profile. However, emerging markets are slightly underrepresented, which may limit growth opportunities. Geographic diversification can help reduce regional risks, but it also exposes the portfolio to currency and geopolitical factors. Consider increasing exposure to emerging markets, which could provide higher returns, albeit with increased volatility.

Redundant positions Info

  • Avantis® International Equity ETF
    Schwab Fundamental International Small Company Index ETF
    Dimensional International Value ETF
    High correlation
  • iShares Core S&P Small-Cap ETF
    Avantis® U.S. Small Cap Value ETF
    High correlation

The portfolio exhibits high correlation among certain asset groups, such as international equity ETFs. This correlation suggests that these assets may move in tandem, potentially limiting diversification benefits during market downturns. While correlation can streamline portfolio management, it may also increase risk. Consider replacing some highly correlated assets with alternatives that offer different risk-return profiles, thereby enhancing diversification and reducing overall portfolio risk.

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 is a candidate for optimization using the Efficient Frontier, which seeks the best risk-return balance. However, the presence of highly correlated assets may limit the benefits of optimization. By focusing on assets with varying risk-return profiles, the portfolio can achieve a more efficient frontier. Consider reallocating among current assets to improve the risk-return ratio, but maintain alignment with your investment objectives and risk tolerance.

Dividends Info

  • Avantis® International Equity ETF 1.90%
  • Avantis® Emerging Markets Value ETF 1.00%
  • Avantis® U.S. Equity ETF 0.90%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Dimensional International Value ETF 2.90%
  • iShares MSCI Emerging Markets Small-Cap ETF 0.40%
  • Schwab Fundamental International Small Company Index ETF 0.80%
  • iShares Core S&P Small-Cap ETF 2.10%
  • Invesco S&P 500® Pure Value ETF 1.60%
  • Vanguard Real Estate Index Fund ETF Shares 3.90%
  • Weighted yield (per year) 1.71%

The portfolio's dividend yield stands at 1.71%, with contributions from various ETFs. This yield provides a modest income stream, which can be an attractive feature for income-focused investors. While dividends can enhance total returns, they are not the primary focus of this growth-oriented portfolio. If income generation is a priority, consider increasing allocations to high-dividend-yielding assets. However, ensure that any changes align with overall investment goals and risk tolerance.

Ongoing product costs Info

  • Avantis® International Equity ETF 0.23%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Equity ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Dimensional International Value ETF 0.27%
  • iShares MSCI Emerging Markets Small-Cap ETF 0.70%
  • Schwab Fundamental International Small Company Index ETF 0.39%
  • iShares Core S&P Small-Cap ETF 0.06%
  • Invesco S&P 500® Pure Value ETF 0.35%
  • Vanguard Real Estate Index Fund ETF Shares 0.12%
  • Weighted costs total (per year) 0.29%

With an average Total Expense Ratio (TER) of 0.29%, the portfolio maintains relatively low costs. This efficiency supports better long-term performance by minimizing the drag on returns. Compared to industry averages, this cost structure is commendable and aligns with best practices. Keeping costs low is crucial for maximizing net returns. Regularly reviewing and comparing fund expenses can help identify opportunities to reduce costs further, such as switching to lower-cost alternatives without sacrificing quality.

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