Balanced Growth Portfolio with Strong US Focus and Low Diversification

Report created on Dec 5, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of four ETFs, with a heavy reliance on US equities. The Vanguard S&P 500 ETF makes up 50% of the portfolio, providing broad exposure to large-cap US stocks. The Schwab U.S. Dividend Equity ETF represents 20%, focusing on dividend-paying stocks. The Avantis U.S. Small Cap Value ETF and the Invesco QQQ Trust each account for 15%, adding exposure to small-cap value stocks and tech-heavy growth stocks, respectively. This composition indicates a growth-oriented strategy but with limited diversification across asset classes and geographies, heavily leaning towards the US market.

Growth Info

Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 18.21%. This indicates robust growth over time, although it experienced a maximum drawdown of -34.51%, reflecting volatility and risk. The portfolio's returns are concentrated, with 90% of returns occurring in just 18 days, highlighting the importance of staying invested during volatile periods. This performance suggests potential for high returns but also underscores the risk of significant fluctuations, which investors should be prepared for.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance was projected. This statistical method models potential future outcomes based on historical data. The median outcome suggests a 906.61% increase in portfolio value, while the 5th percentile projects a 130.37% increase, indicating a wide range of potential outcomes. The annualized return across simulations is 20.7%, demonstrating the portfolio's potential for growth. However, the variability in outcomes highlights the inherent uncertainty and risk associated with investing, emphasizing the need for risk management strategies.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, with a negligible cash position. This single-asset-class focus aligns with a growth strategy, aiming for capital appreciation. However, it also exposes the portfolio to market volatility and economic downturns. Diversifying into other asset classes, such as bonds or real estate, could provide stability and reduce risk. A more balanced asset allocation could help mitigate potential losses during market fluctuations, offering a smoother investment journey while still pursuing growth objectives.

Sectors Info

  • Technology
    27%
  • Financials
    15%
  • Consumer Discretionary
    12%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    7%
  • Energy
    7%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    1%

Sector allocation reveals a strong bias towards technology, which constitutes 27.25% of the portfolio. Financial services and consumer cyclicals follow, making up 14.91% and 11.72%, respectively. This concentration in a few sectors can lead to increased risk if these sectors underperform. While tech has been a strong performer, it's important to consider diversifying into other sectors to enhance stability. A more balanced sector allocation could help cushion the portfolio against sector-specific downturns, maintaining growth potential while reducing volatility.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is heavily concentrated in North America, with 98.89% exposure. This lack of international diversification limits the portfolio's potential to benefit from growth in other regions. While US markets have historically performed well, global diversification can provide exposure to different economic cycles and reduce risk. Expanding the geographic allocation to include more international markets could enhance growth opportunities and provide a hedge against US-specific economic downturns, creating a more resilient portfolio.

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 currently exhibits a growth-oriented profile with a focus on US equities and limited diversification. To optimize, consider exploring the efficient frontier, which balances risk and return. Moving towards a riskier portfolio involves increasing exposure to high-growth sectors or equities, while a more conservative approach could involve incorporating bonds or other asset classes. Before optimizing, ensure diversification is sufficient to manage risk. Balancing growth with risk management will enhance the portfolio's resilience and potential returns.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco QQQ Trust 0.60%
  • Schwab U.S. Dividend Equity ETF 3.40%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.60%

The portfolio's dividend yield stands at 1.6%, with the Schwab U.S. Dividend Equity ETF contributing a significant portion at 3.4%. This yield provides a modest income stream, which can be reinvested to enhance long-term growth. While the focus is on growth, maintaining a portion of the portfolio in dividend-paying stocks can add stability and provide a buffer during market downturns. Balancing growth with income-generating assets could improve the portfolio's overall risk-return profile, offering both capital appreciation and income.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco QQQ Trust 0.20%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.09%

Portfolio costs are relatively low, with a total expense ratio (TER) of 0.09%. The Vanguard S&P 500 ETF and Schwab U.S. Dividend Equity ETF contribute to this efficiency with minimal fees. Keeping costs low is crucial for maximizing returns, as high fees can erode gains over time. This cost-effective structure supports the portfolio's growth objectives by allowing more of the investment to compound. Continuing to prioritize low-cost investments can enhance the portfolio's performance, ensuring that fees do not detract from overall returns.

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