A growth-focused portfolio with strong U.S. equities presence and minimal global diversification

Report created on Jan 21, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification

Positions

The portfolio predominantly consists of U.S. equities, with a substantial 70% allocation in the Vanguard S&P 500 ETF. This is complemented by a 20% allocation in Avantis U.S. Small Cap Value ETF, providing exposure to smaller companies. The remaining 10% is split evenly between U.S. Treasury bonds and physical gold ETFs. This composition leans heavily towards equities, reflecting a growth-oriented strategy. While this structure can drive substantial returns, it may also expose the portfolio to higher volatility. Balancing equity exposure with other asset classes could enhance diversification and mitigate risk.

Growth Info

Historically, the portfolio has delivered a strong Compound Annual Growth Rate (CAGR) of 16.32%, indicating robust performance over time. However, it experienced a significant maximum drawdown of -33.09%, highlighting potential vulnerability during market downturns. This performance is generally in line with the S&P 500, which has seen similar trends. While past performance is not a guarantee of future results, understanding these patterns can help set realistic expectations. Consider diversifying further to potentially reduce drawdown risk while maintaining growth potential.

Projection Info

The Monte Carlo simulation, using historical data, projects a wide range of potential outcomes for the portfolio. With 1,000 simulations, 967 resulted in positive returns, indicating a high probability of gains. The median (50th percentile) projected return is 339%, while the 5th percentile suggests a more conservative 21.5% return. These projections highlight the portfolio's growth potential but also underscore the inherent uncertainty in future returns. Remember, simulations are based on past data and cannot predict future events. Regularly reviewing and adjusting the portfolio can help navigate changing market conditions.

Asset classes Info

  • Stocks
    90%
  • Other
    5%
  • Bonds
    5%

The portfolio is heavily weighted towards stocks, comprising 90% of the allocation, with the remainder in bonds and gold. This high equity concentration aligns with a growth-focused strategy, aiming for capital appreciation. However, this also means increased exposure to market volatility. While bonds and gold provide some stability, their low allocation limits their impact. Diversifying into additional asset classes could enhance risk-adjusted returns by providing a buffer during equity market downturns. Consider exploring other asset classes like international equities or alternative investments for better balance.

Sectors Info

  • Technology
    24%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Industrials
    9%
  • Health Care
    8%
  • Telecommunications
    7%
  • Energy
    6%
  • Consumer Staples
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is notably concentrated, with technology making up 24% of the portfolio, followed by financial services at 15%. This mirrors the S&P 500's sector distribution but may expose the portfolio to sector-specific risks, such as tech volatility during interest rate changes. While this concentration can drive growth during tech booms, it also increases vulnerability to sector downturns. Diversifying across sectors could help mitigate these risks and provide more stable returns. Consider adjusting sector weights to align with broader market trends and reduce reliance on any single sector.

Regions Info

  • North America
    89%

Geographically, the portfolio is overwhelmingly focused on North America, with 89% exposure. This concentration limits diversification benefits that come from international investments, which can provide a hedge against domestic market fluctuations. While the U.S. market has been a strong performer, global diversification can help capture growth opportunities in emerging and developed markets abroad. Consider integrating international equities to broaden geographic exposure and enhance diversification, potentially reducing overall portfolio risk.

Market capitalization Info

  • Mega-cap
    33%
  • Large-cap
    24%
  • Mid-cap
    13%
  • Small-cap
    11%
  • Micro-cap
    9%

The portfolio's market capitalization distribution is quite diverse, with 33% in mega caps and a significant 24% in large caps. Medium, small, and micro caps make up the rest, providing a balanced exposure across different company sizes. This mix allows for stability from larger companies while capturing growth potential from smaller firms. However, the high allocation in smaller caps can increase volatility. Balancing the market cap exposure could optimize returns by leveraging the stability of large caps and the growth potential of smaller companies.

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's current allocation can be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on existing assets. This approach involves adjusting the weights of the assets to achieve an ideal balance between risk and return. While already growth-focused, slight adjustments could enhance efficiency without sacrificing the growth objective. Consider rebalancing periodically to maintain alignment with the Efficient Frontier, ensuring that the portfolio remains optimized as market conditions evolve.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Schwab Intermediate-Term U.S. Treasury ETF 4.70%
  • Vanguard S&P 500 ETF 1.20%
  • Weighted yield (per year) 1.40%

The portfolio's overall dividend yield stands at 1.40%, largely influenced by the Avantis U.S. Small Cap Value ETF's 1.60% yield and the Schwab Intermediate-Term U.S. Treasury ETF's 4.70% yield. While not the primary focus of a growth-oriented portfolio, dividends can provide a steady income stream and enhance total returns. For investors seeking income, increasing exposure to higher-yielding assets could boost dividend income. However, it's crucial to balance yield with growth potential, ensuring that income-generating assets align with long-term growth objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab Intermediate-Term U.S. Treasury ETF 0.03%
  • abrdn Physical Gold Shares ETF 0.17%
  • Vanguard S&P 500 ETF 0.03%
  • Weighted costs total (per year) 0.08%

With a total expense ratio (TER) of 0.08%, the portfolio is cost-effective, minimizing the drag on returns. Low costs are crucial for long-term performance, as they compound over time, enhancing net returns. This aligns well with best practices in portfolio management. While the low-cost structure is commendable, it's always beneficial to periodically review expenses to ensure they remain competitive. Keeping costs in check supports better compounding of returns, contributing to overall portfolio growth.

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