Growth-Oriented Portfolio with Strong U.S. Focus and Moderate Diversification for Risk-Tolerant Investors

Report created on Dec 4, 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 heavily weighted towards growth with an 80% allocation to the Vanguard S&P 500 Growth Index Fund ETF Shares, complemented by a 10% allocation each to Avantis® U.S. Small Cap Value ETF and Vanguard Total International Stock Index Fund ETF Shares. This composition suggests a clear focus on capital appreciation, primarily through large-cap U.S. growth stocks. The inclusion of small-cap value and international stocks adds some diversification, though the portfolio remains predominantly U.S.-centric. It’s a moderately diversified portfolio, meaning there’s a balance between risk and return, but it could benefit from further diversification to mitigate potential risks.

Growth Info

Historically, the portfolio has performed impressively with a compound annual growth rate (CAGR) of 18.52%. However, it experienced a maximum drawdown of -32.96%, indicating significant volatility during downturns. The fact that 90% of returns were achieved in just 18 days underscores the portfolio's reliance on a few high-performance periods, typical of growth-focused investments. This performance pattern suggests the potential for high returns, but also highlights the importance of being prepared for significant market swings. Investors should consider whether they are comfortable with this level of volatility in pursuit of high returns.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's forward projection shows a wide range of potential outcomes. A hypothetical initial investment could see returns as low as 50.46% at the 5th percentile or as high as 893.37% at the 67th percentile. The median outcome suggests a 559.94% return, with 981 simulations yielding positive returns. The annualized return across all simulations is 17.85%, reflecting strong potential for future growth. However, the variability in outcomes highlights the inherent uncertainty and risk associated with growth-oriented portfolios. Investors should weigh these projections against their risk tolerance and investment goals.

Asset classes Info

  • Stocks
    100%

The portfolio is almost entirely composed of stocks, with 99.79% allocated to equities, a mere 0.20% in cash, and negligible amounts in other asset classes. This heavy stock allocation aligns with a growth-focused strategy, aiming to maximize returns through equity investments. While stocks offer the potential for high returns, they also come with increased volatility. Introducing more asset classes, such as bonds or real estate, could provide stability and reduce overall risk. However, given the current composition, this portfolio is suited for investors who are comfortable with significant exposure to the stock market.

Sectors Info

  • Technology
    43%
  • Consumer Discretionary
    14%
  • Telecommunications
    11%
  • Financials
    9%
  • Industrials
    7%
  • Health Care
    6%
  • Consumer Staples
    3%
  • Energy
    3%
  • Basic Materials
    2%
  • Real Estate
    1%
  • Utilities
    1%

Sector allocation within the portfolio is heavily tilted towards technology, which comprises 42.78%. Other significant sectors include consumer cyclicals, communication services, and financial services. This concentration in technology suggests a bet on continued growth and innovation within that sector. While this can lead to substantial gains, it also exposes the portfolio to sector-specific risks. Diversifying into sectors like healthcare, energy, or utilities could balance the risk and provide more stability. Investors should assess their comfort with the current sector exposure and consider adjustments to align with their risk tolerance.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly focused on North America, with 90.36% of assets allocated there. The remaining exposure is spread thinly across Europe, Asia, and other regions. This strong North American focus reflects confidence in the U.S. market's growth potential but also limits exposure to international opportunities. Expanding geographic diversification could mitigate regional risks and capitalize on growth in emerging markets. Investors should evaluate their comfort with the current geographic allocation and consider broadening their exposure to enhance diversification and reduce potential risks tied to any single region.

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 analysis suggests that while the current allocation is growth-focused, there is room for improvement. Investors can adjust their position along the efficient frontier to achieve a more balanced risk-return profile. Moving towards a riskier portfolio could involve increasing exposure to high-growth sectors, while a more conservative approach might include diversifying into bonds or other stable asset classes. Before optimizing, investors should first consider addressing other areas such as geographic and sector diversification. The goal is to align the portfolio with personal risk tolerance and long-term financial objectives.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.60%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 0.92%

The portfolio's dividend yield stands at 0.92%, with the Vanguard Total International Stock Index Fund ETF Shares offering the highest yield at 2.9%. This relatively low overall yield is typical for a growth-focused portfolio, where the emphasis is on capital appreciation rather than income generation. While dividends can provide a steady income stream, they are not the primary focus here. Investors seeking higher income might consider rebalancing towards dividend-paying stocks or funds. However, for those prioritizing growth, the current yield aligns well with the portfolio's objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 Growth Index Fund ETF Shares 0.10%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.11%

The total expense ratio (TER) for the portfolio is 0.11%, indicating a cost-effective investment strategy. This low cost is advantageous, as it allows more of the portfolio's returns to be retained by the investor. The Vanguard S&P 500 Growth Index Fund ETF Shares and Vanguard Total International Stock Index Fund ETF Shares contribute to this low-cost structure, with expense ratios of 0.1% and 0.08%, respectively. Keeping investment costs low is crucial for maximizing net returns over time. Investors should continue to monitor costs and seek opportunities to minimize fees where possible.

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