A growth-focused portfolio with high US exposure and moderate international diversification
Report created on Mar 28, 2025Risk profile
5/7
Diversification profile
3/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 70.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 20.00% -
VX Vanguard Total International Stock Index Fund ETF Shares
VXUS - US9219097683 10.00%
The portfolio is heavily weighted towards the Vanguard S&P 500 ETF, making up 70% of the total assets. This indicates a strong focus on large-cap U.S. equities, which are typically seen as a stable growth vehicle. The Avantis U.S. Small Cap Value ETF accounts for 20%, providing exposure to smaller companies with potential for higher growth. The remaining 10% is in the Vanguard Total International Stock Index Fund, adding some international diversification. This composition is typical for a growth-oriented portfolio, but it leans heavily on U.S. markets. Consider diversifying further into international equities to reduce geographic concentration and potentially enhance returns.
Growth
Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 15%. This suggests strong past returns, likely driven by the significant allocation to U.S. large-cap stocks. However, the maximum drawdown of -36.23% highlights the potential volatility and risk associated with such a concentrated equity position. While historical performance can offer insights, it's important to remember that past results don't guarantee future outcomes. To manage risk, consider strategies that could help mitigate drawdowns, such as diversifying into different asset classes or regions.
Projection
The Monte Carlo simulation, using historical data, forecasts a wide range of potential future outcomes. With 1,000 simulations, the portfolio's 5th percentile outcome is a 7.6% return, while the median is 376.6%, and the 67th percentile is 612.8%. This suggests a high probability of positive returns, with 962 simulations showing gains. However, it's crucial to note that simulations are based on historical data, which may not predict future market conditions. Consider using these projections as a guide for setting realistic expectations and adjusting your risk tolerance accordingly.
Asset classes
- Stocks 100%
The portfolio is entirely composed of equities, with no allocation to bonds, cash, or alternative assets. This 100% stock allocation is typical for a growth-focused strategy, aiming to maximize returns over the long term. However, it also increases exposure to market volatility. Diversifying into other asset classes, such as bonds or real estate, could provide stability and reduce risk, especially during market downturns. Consider assessing your risk tolerance to determine if a more balanced asset allocation aligns with your investment goals.
Sectors
- Technology 25%
- Financials 18%
- Consumer Discretionary 12%
- Industrials 10%
- Health Care 9%
- Telecommunications 8%
- Consumer Staples 6%
- Energy 5%
- Basic Materials 3%
- Utilities 2%
- Real Estate 2%
The sector allocation shows a significant concentration in technology (25%) and financial services (18%). While this reflects a common trend in growth portfolios, it may expose the portfolio to sector-specific risks, such as regulatory changes or economic shifts. Other sectors like consumer cyclicals and industrials also have notable allocations. To mitigate sector risk, consider balancing exposure across a broader range of industries. This can help cushion the impact of sector-specific downturns and provide a more stable return profile over time.
Regions
- North America 90%
- Europe Developed 4%
- Asia Emerging 2%
- Japan 2%
- Asia Developed 1%
Geographically, the portfolio is heavily concentrated in North America, with 90% exposure. This focus on the U.S. market has historically been beneficial but may limit diversification benefits. The remaining 10% is spread across Europe, Asia, and Japan, providing some international exposure. To enhance geographic diversification and reduce reliance on the U.S. market, consider increasing allocations to emerging markets or other developed regions. This could help capture growth opportunities in different economic environments and potentially improve risk-adjusted returns.
Market capitalization
- Mega-cap 37%
- Large-cap 27%
- Mid-cap 14%
- Small-cap 10%
- Micro-cap 10%
The portfolio's market capitalization breakdown is predominantly in mega and big-cap stocks, comprising 64% of the allocation. This suggests a focus on established companies with stable growth prospects. The inclusion of small and micro-cap stocks, at 20%, adds potential for higher returns but also comes with increased volatility. This mix offers a balance between stability and growth potential. To further optimize, consider adjusting allocations based on your risk tolerance and market outlook, potentially increasing exposure to mid-cap stocks for a more diversified approach.
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 could be optimized using the Efficient Frontier, which is a concept that helps identify the best possible risk-return ratio for a given set of assets. Currently, the portfolio's allocation may not be fully optimized, as it heavily leans towards U.S. equities. By adjusting the weights between existing holdings or considering additional asset classes, you might achieve a more efficient balance. However, remember that optimization is based on historical data and assumptions, and should be aligned with your personal risk tolerance and investment goals.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.40%
- Vanguard S&P 500 ETF 1.00%
- Vanguard Total International Stock Index Fund ETF Shares 2.80%
- Weighted yield (per year) 1.26%
The portfolio's total dividend yield is 1.26%, with contributions from all ETFs. The Vanguard Total International Stock Index Fund offers the highest yield at 2.80%, providing some income alongside growth potential. Dividends can play a crucial role in total returns, especially in volatile markets. While the focus is on growth, maintaining a portion of dividend-paying assets can enhance income generation and offer a buffer during downturns. Consider evaluating whether the current yield aligns with your income needs and if adjustments are necessary to balance growth and income.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Vanguard S&P 500 ETF 0.03%
- Vanguard Total International Stock Index Fund ETF Shares 0.05%
- Weighted costs total (per year) 0.08%
The portfolio's total expense ratio (TER) is impressively low at 0.08%, thanks to the inclusion of low-cost ETFs like the Vanguard S&P 500 ETF. Low costs are beneficial for long-term performance, as they reduce the drag on returns. The Avantis U.S. Small Cap Value ETF has a slightly higher expense ratio at 0.25%, but it remains competitive. Keeping costs low is a key strategy for maximizing returns over time. Ensure that any future additions or changes to the portfolio maintain a focus on cost efficiency to continue benefiting from reduced expenses.
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