A growth-focused portfolio with broad diversification and significant exposure to North American equities

Report created on Aug 12, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is primarily composed of four ETFs, with a significant allocation to the Vanguard Total World Stock Index Fund ETF Shares at 40%. This is complemented by 25% in the Schwab U.S. Large-Cap Growth ETF, 20% in the Schwab U.S. Dividend Equity ETF, and 15% in the Avantis U.S. Small Cap Value ETF. This structure indicates a strong focus on equities, particularly large-cap growth and dividend-paying stocks. Such a composition is relevant for investors seeking growth while maintaining a level of income through dividends. Adjusting the balance between these ETFs can help align the portfolio with specific risk and return objectives.

Growth Info

Historically, the portfolio has shown a commendable compound annual growth rate (CAGR) of 16.78%, albeit with a maximum drawdown of -35.12%. This suggests that while the portfolio has delivered strong returns, it has also experienced significant volatility. Understanding past performance is crucial, as it provides insights into how the portfolio might react during market downturns. However, past performance is not indicative of future results. Investors should consider diversifying further or employing risk management strategies to mitigate potential drawdowns.

Projection Info

The Monte Carlo simulation, which uses historical data to project future outcomes, indicates a wide range of potential returns. With a 5th percentile projection of 65.58% and a 67th percentile projection of 1,191.7%, the results highlight both the risks and opportunities. This suggests a high degree of uncertainty, typical for growth-focused portfolios. While simulations can guide expectations, they are based on historical data and assumptions that may not hold in the future. Investors should use these projections as a tool for planning rather than a guarantee of outcomes.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.63% of assets in this class, and minimal cash and other allocations. Such a concentration in equities can drive growth but also increases exposure to market volatility. Diversifying into other asset classes like bonds or real estate could provide more stability and reduce risk. A well-balanced allocation can help achieve a smoother return profile, aligning with long-term investment goals. Investors should consider their risk tolerance when deciding on the appropriate mix of asset classes.

Sectors Info

  • Technology
    25%
  • Financials
    17%
  • Consumer Discretionary
    12%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    7%
  • Energy
    7%
  • Consumer Staples
    6%
  • Basic Materials
    3%
  • Real Estate
    1%
  • Utilities
    1%

The portfolio is diversified across various sectors, with the highest allocation in Technology (24.87%), followed by Financial Services (16.50%) and Consumer Cyclicals (11.96%). This sectoral distribution suggests a tilt towards growth-oriented sectors, which can benefit from economic expansion. However, it also means the portfolio may be vulnerable to sector-specific downturns. To manage risk, investors might consider rebalancing to ensure no single sector dominates. A balanced sector allocation can enhance resilience against economic shifts.

Regions Info

  • North America
    85%
  • Europe Developed
    6%
  • Asia Emerging
    3%
  • Japan
    2%
  • Asia Developed
    2%
  • Australasia
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

The portfolio has a strong geographic bias towards North America, comprising 85.39% of the allocation. This concentration reflects confidence in the stability and growth prospects of this region but also exposes the portfolio to regional economic risks. Expanding exposure to other regions, such as Europe or Asia, can enhance diversification and tap into growth opportunities in emerging markets. Geographic diversification can help mitigate risks associated with regional economic downturns and currency fluctuations.

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 the best possible risk-return ratio based on current assets. By adjusting the allocation between existing ETFs, investors can aim to improve efficiency without necessarily adding new assets. This involves finding a balance that maximizes returns for a given level of risk. However, it's important to note that optimization doesn't guarantee diversification or address all investment goals. Regularly reassessing the portfolio's efficiency is a key part of strategic management.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Dividend Equity ETF 2.60%
  • Schwab U.S. Large-Cap Growth ETF 0.30%
  • Vanguard Total World Stock Index Fund ETF Shares 1.80%
  • Weighted yield (per year) 1.54%

The portfolio's dividend yield stands at 1.54%, with the Schwab U.S. Dividend Equity ETF offering the highest yield at 2.6%. Dividends provide a steady income stream, which can be particularly attractive during periods of market volatility. Reinvesting dividends can enhance compounding returns over time. Investors seeking higher income might consider increasing exposure to dividend-focused ETFs. Balancing growth and income is crucial for achieving financial goals, especially for those relying on portfolio income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.09%

The total expense ratio (TER) of the portfolio is 0.09%, which is relatively low. Keeping costs down is essential for maximizing long-term returns, as fees can erode gains over time. Investors should regularly review their portfolio's cost structure and seek lower-cost alternatives if available. Even small reductions in expenses can have a significant impact on net returns over the long haul. Focusing on cost-effective investment options is a prudent strategy for enhancing portfolio performance.

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