Cautious Broadly Diversified Portfolio With Strong Historical Performance and Low Costs
Report created on Jul 8, 2024Risk profile
3/7
Diversification profile
4/5
Positions
-
VT Vanguard Total Stock Market Index Fund ETF Shares
VTI - US9229087690 60.00% -
AV Avantis Total International Markets Value ETF
AVNV - US0250721661 20.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 20.00%
The portfolio is composed of three ETFs, with the Vanguard Total Stock Market Index Fund ETF Shares making up 60% of the portfolio. This indicates a strong focus on the U.S. stock market, providing broad exposure to the entire U.S. stock market. The remaining 40% is split equally between the Avantis Total International Markets Value ETF and the Avantis® U.S. Small Cap Value ETF, offering international exposure and a focus on small-cap value stocks. This composition reflects a cautious yet diversified approach, aiming to balance growth potential with risk management through broad market coverage.
Growth
Historically, the portfolio has shown an impressive compound annual growth rate (CAGR) of 21.84%, indicating strong past performance. A maximum drawdown of -10.95% suggests that while the portfolio has experienced some volatility, it has managed risks effectively. The fact that 90% of returns were achieved in just 16 days highlights the importance of staying invested to capture these significant gains. This historical data suggests that the portfolio has been well-positioned to benefit from market upswings, while also being resilient during downturns, aligning with a cautious investor's goals.
Projection
The forward projection using a Monte-Carlo simulation, which runs numerous scenarios to predict future performance, suggests potential for substantial growth. With a hypothetical initial investment, the 50th percentile outcome is a 1,440.09% return, and the 5th percentile still shows a positive 484.97% return. All simulations resulted in positive returns, with an annualized return of 22.39%. This indicates that while past performance is not guaranteed, the portfolio has a strong likelihood of continued growth. This data supports the cautious investor's desire for steady growth with manageable risk.
Asset classes
- Stocks 100%
The portfolio is heavily weighted towards stocks, with 99.63% in equities, and minimal allocations in cash and bonds. This high equity exposure aligns with a strategy focused on capital appreciation rather than income generation or capital preservation. While this can offer higher returns, it also increases exposure to market volatility. For a cautious investor, it might be advisable to consider increasing exposure to bonds to balance risk and return, especially if nearing retirement or needing more stable income streams.
Sectors
- Technology 21%
- Financials 19%
- Industrials 13%
- Consumer Discretionary 12%
- Health Care 8%
- Energy 7%
- Telecommunications 6%
- Basic Materials 5%
- Consumer Staples 5%
- Real Estate 2%
- Utilities 2%
Sector allocation is diverse, with significant investments in Technology, Financial Services, Industrials, and Consumer Cyclicals. This diversification across sectors helps mitigate risks associated with sector-specific downturns while capturing opportunities in various market segments. However, certain sectors like Utilities and Real Estate have lower representation, which could be a consideration for enhancing stability in volatile markets. Maintaining a balance between growth-oriented sectors and more defensive ones can help manage risk while aiming for long-term growth.
Regions
- North America 81%
- Europe Developed 7%
- Asia Emerging 3%
- Japan 3%
- Asia Developed 3%
- Australasia 1%
- Latin America 1%
- Africa/Middle East 1%
Geographically, the portfolio is heavily invested in North America, with 80.97% exposure, providing strong alignment with U.S. market trends. International exposure is achieved through investments in Europe, Asia, and other regions, though these are relatively smaller allocations. This geographic diversification helps reduce risks associated with any single market's downturns while capturing growth opportunities globally. To further balance risk and growth potential, considering a more even distribution across developed and emerging markets could enhance overall portfolio resilience.
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 indicates potential for further optimization by adjusting the balance between risk and return. By moving along the efficient frontier, investors can explore achieving a riskier or more conservative portfolio. For those seeking higher returns, increasing exposure to growth assets might be an option, whereas those looking to reduce risk could consider adding more bonds or defensive sectors. However, given the current broadly diversified status, it may be more beneficial to focus on maintaining this balance while keeping costs low and monitoring performance.
Dividends
- Avantis Total International Markets Value ETF 2.90%
- Avantis® U.S. Small Cap Value ETF 1.50%
- Vanguard Total Stock Market Index Fund ETF Shares 1.30%
- Weighted yield (per year) 1.66%
The portfolio has a total dividend yield of 1.66%, which is relatively moderate. The Avantis Total International Markets Value ETF offers the highest yield at 2.9%, providing some income alongside capital appreciation. For investors seeking income, this yield might not be sufficient, suggesting a potential area for improvement. Increasing exposure to higher-yielding assets or dividend-focused funds could enhance income generation, providing a more balanced return profile for those looking for both growth and income.
Ongoing product costs
- Avantis Total International Markets Value ETF 0.34%
- Avantis® U.S. Small Cap Value ETF 0.25%
- Vanguard Total Stock Market Index Fund ETF Shares 0.03%
- Weighted costs total (per year) 0.14%
With a total expense ratio (TER) of 0.14%, the portfolio is cost-effective, especially due to the Vanguard Total Stock Market Index Fund ETF Shares' low expense of 0.03%. This low-cost structure helps maximize net returns over time, which is crucial for long-term growth. Keeping costs low is a key component of a successful investment strategy, as high fees can significantly erode returns. Continually monitoring and managing investment costs ensures that more of the portfolio's returns are retained, aligning with prudent financial management.
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