Moderately Diversified Growth Portfolio with High U.S. Exposure and Strong Historical Performance

Report created on Nov 30, 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 mainly composed of three ETFs, with a significant allocation to Schwab U.S. Large-Cap Growth ETF at over 75%. This indicates a strong focus on large-cap growth stocks, with additional exposure to small-cap value and emerging markets through the Avantis U.S. Small Cap Value ETF and Vanguard FTSE Emerging Markets Index Fund ETF Shares. This combination provides a blend of growth potential and value investing, but the heavy weighting towards large-cap growth suggests a potential vulnerability to market volatility. To enhance diversification, consider balancing the weightings across different asset classes and investment styles.

Growth Info

Historically, the portfolio has delivered impressive returns, with a compound annual growth rate (CAGR) of 21.21%. However, it has also experienced a significant maximum drawdown of -34.7%, indicating susceptibility to market downturns. The portfolio's high returns have been concentrated in just a few days, suggesting a reliance on strong market movements for performance. While past performance is not indicative of future results, maintaining a focus on risk management and diversification can help mitigate potential losses during market corrections.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was performed with 1,000 simulations. The results show a wide range of potential outcomes, with the 5th percentile projecting a modest 55.63% return, while the 50th and 67th percentiles predict substantial growth of 639.47% and 1,084.36%, respectively. The majority of simulations resulted in positive returns, with an annualized return of 18.53%. This suggests a high probability of favorable outcomes, but it's essential to remain cautious and prepared for variability in returns.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted in stocks, with over 99% of the allocation in equities and a negligible amount in cash and other asset classes. This concentration in stocks aligns with the growth profile but also increases exposure to market volatility. Diversifying into other asset classes, such as bonds or real estate, could help reduce risk and provide more stability during market fluctuations. A more balanced asset allocation would align with a moderate risk tolerance and provide a buffer against equity market downturns.

Sectors Info

  • Technology
    39%
  • Consumer Discretionary
    13%
  • Financials
    12%
  • Telecommunications
    10%
  • Health Care
    9%
  • Industrials
    7%
  • Energy
    4%
  • Basic Materials
    3%
  • Consumer Staples
    3%
  • Utilities
    1%
  • Real Estate
    1%

The portfolio's sector allocation is dominated by technology, which accounts for nearly 39% of the total. Other significant sectors include consumer cyclicals, financial services, and communication services. While this allocation has likely contributed to strong past performance, it also increases sector-specific risks. A more balanced sector allocation could provide better protection against sector downturns and enhance overall portfolio resilience. Consider diversifying across sectors to reduce concentration risk and ensure exposure to various economic cycles.

Regions Info

  • North America
    94%
  • Asia Emerging
    3%
  • Asia Developed
    1%
  • Latin America
    1%
  • Africa/Middle East
    1%

Geographically, the portfolio is heavily concentrated in North America, with nearly 94% of assets allocated to this region. This focus on the U.S. market may limit exposure to growth opportunities in other regions. While the portfolio includes some emerging market exposure, increasing geographic diversification could enhance potential returns and reduce reliance on the U.S. economy. A more globally diversified portfolio would provide exposure to different economic environments and potential growth areas outside of North America.

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 is positioned on the growth side of the efficient frontier, indicating a focus on higher returns with increased risk. To optimize, investors can explore reallocating assets towards bonds or other lower-risk investments to achieve a more conservative portfolio. This shift can help reduce volatility and improve risk-adjusted returns. Alternatively, for those seeking higher returns, increasing exposure to high-growth sectors or emerging markets may be considered. Balancing risk and return is key to achieving an optimal portfolio aligned with personal investment goals.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 0.74%

The portfolio's dividend yield is relatively low at 0.74%, reflecting its focus on growth-oriented investments. While growth stocks may offer capital appreciation, they typically provide lower income through dividends. For investors seeking income, increasing exposure to higher-yielding assets could enhance the portfolio's income potential. Balancing growth and income objectives can create a more comprehensive investment strategy that caters to both capital appreciation and income generation.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.08%

The portfolio's total expense ratio (TER) is low at 0.08%, which is advantageous for long-term returns. Low costs mean more of the portfolio's returns are retained, rather than being eroded by fees. This cost efficiency is a positive aspect of the portfolio, and maintaining a focus on low-cost investments can enhance overall performance. Keeping investment costs low is a crucial component of a successful investment strategy, allowing for more significant compounding of returns over time.

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