Balanced Growth Portfolio with Strong U.S. Focus and High-Tech Exposure Suitable for Moderate Risk Appetite Investors
Report created on Nov 30, 2024Risk profile
5/7
Diversification profile
4/5
Positions
-
SC Schwab U.S. Large-Cap Growth ETF
SCHG - US8085243009 60.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 25.00% -
VE Vanguard FTSE Developed Markets Index Fund ETF Shares
VEA - US9219438580 7.50% -
VW Vanguard FTSE Emerging Markets Index Fund ETF Shares
VWO - US9220428588 7.50%
The portfolio consists of four ETFs, with a dominant 60% allocation in the Schwab U.S. Large-Cap Growth ETF. This is complemented by a 25% stake in the Avantis® U.S. Small Cap Value ETF. The remainder is split equally between Vanguard's FTSE Developed and Emerging Markets ETFs, each accounting for 7.5%. This composition indicates a strong focus on U.S. equities while maintaining a degree of international exposure. The heavy weighting in growth stocks suggests a tilt towards potential capital appreciation. For a balanced approach, consider evaluating the current allocation to ensure it aligns with long-term goals.
Growth
Historically, the portfolio has performed quite well, boasting a Compound Annual Growth Rate (CAGR) of 19.77%. However, it has also experienced a significant maximum drawdown of -35.51%, indicating periods of volatility. Notably, 90% of the returns are concentrated within just 20 days, highlighting the importance of staying invested during turbulent times. This performance suggests that while the portfolio can deliver substantial returns, it is also subject to considerable fluctuations. To mitigate risk, it's essential to maintain a diversified strategy and consider rebalancing periodically.
Projection
Utilizing a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This approach models potential outcomes based on historical data and provides a range of possible future returns. The median result shows a 436.63% increase, with a 15.43% annualized return across simulations. However, the 5th percentile result is only 16.23%, underscoring the inherent risk. While the outlook is optimistic, with 963 simulations yielding positive returns, it's crucial to remain aware of potential downturns. Regularly reviewing and adjusting the portfolio can help navigate market uncertainties.
Asset classes
- Stocks 100%
The portfolio is overwhelmingly invested in stocks, accounting for 99.56% of the total allocation. This heavy equity exposure is typical for a growth-oriented portfolio, aiming for capital appreciation over time. The minimal presence of cash and other asset classes suggests a focus on maximizing returns rather than preserving capital. While this strategy can be rewarding in bullish markets, it also increases vulnerability during downturns. To enhance stability, consider introducing a modest allocation to bonds or other fixed-income securities, which can provide a buffer against market volatility.
Sectors
- Technology 33%
- Financials 15%
- Consumer Discretionary 13%
- Industrials 9%
- Telecommunications 9%
- Health Care 8%
- Energy 5%
- Basic Materials 4%
- Consumer Staples 3%
- Real Estate 1%
- Utilities 1%
The sector allocation is heavily weighted towards Technology, which comprises 32.76% of the portfolio. This is followed by Financial Services and Consumer Cyclicals, at 14.77% and 13.11%, respectively. The significant emphasis on tech stocks suggests a pursuit of high growth, but it also introduces sector-specific risks. Other sectors like Industrials, Communication Services, and Healthcare provide some diversification. However, the portfolio's concentration in a few sectors could expose it to market swings. Balancing sector allocation can help manage risk and capitalize on opportunities across different economic cycles.
Regions
- North America 85%
- Asia Emerging 5%
- Europe Developed 4%
- Asia Developed 2%
- Japan 2%
- Latin America 1%
- Africa/Middle East 1%
- Australasia 1%
Geographically, the portfolio is predominantly focused on North America, with an 85.19% allocation. This strong U.S. bias reflects confidence in the region's economic prospects but limits exposure to international markets. The remaining allocation is spread across Asia, Europe, and other regions, providing some diversification. However, the minimal investment in emerging markets and other global regions may restrict potential growth opportunities. To achieve a more balanced geographic exposure, consider gradually increasing investments in diverse regions, which can offer growth potential and reduce reliance on a single market.
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 adjusting the risk-return balance. Moving along the efficient frontier can help achieve a more conservative or riskier portfolio, depending on the investor's preference. To optimize the portfolio, consider diversifying across different asset classes and regions to reduce risk. This can enhance the portfolio's resilience to market fluctuations. While the current allocation is growth-focused, exploring opportunities for further diversification can improve stability. Prioritize aligning the portfolio with individual risk tolerance and financial objectives for optimal results.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.50%
- Schwab U.S. Large-Cap Growth ETF 0.40%
- Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
- Weighted yield (per year) 1.04%
The portfolio offers a modest total dividend yield of 1.04%, with the Vanguard FTSE Developed Markets Index Fund ETF Shares contributing the highest yield at 3.0%. This suggests a focus on capital growth rather than income generation. While dividends provide a steady income stream, the current yield is relatively low compared to income-focused portfolios. Investors seeking higher income may consider reallocating a portion of the portfolio to dividend-paying stocks or funds. However, it's important to balance income needs with growth objectives to maintain the portfolio's overall strategy.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Schwab U.S. Large-Cap Growth ETF 0.04%
- Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.10%
The portfolio's total expense ratio (TER) is a low 0.1%, reflecting the cost-effectiveness of its ETF holdings. The Schwab U.S. Large-Cap Growth ETF has the lowest expense ratio at 0.04%, while the Avantis® U.S. Small Cap Value ETF is the highest at 0.25%. Keeping costs low is crucial for maximizing net returns, as high fees can erode gains over time. The current cost structure is favorable, but it's important to regularly review fund expenses and explore opportunities to further reduce costs. This can enhance the portfolio's long-term performance.
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