Growth Focused Portfolio with Strong Diversification and Moderate Risk for Long-Term Investors

Report created on Nov 10, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio is composed of four ETFs, focusing primarily on U.S. large-cap growth and small-cap value stocks, with a smaller allocation to developed and emerging markets. This composition shows a strong emphasis on growth-oriented investments, which is typical for investors seeking higher returns over time. The allocation suggests a robust diversification strategy, spreading investments across different market caps and geographic regions. To enhance diversification further, consider balancing with different asset classes like bonds, which can provide stability during market downturns.

Growth Info

Historically, this portfolio has performed well, with a compound annual growth rate (CAGR) of 18.85%. This impressive growth reflects the portfolio's focus on growth stocks, which have delivered substantial returns in recent years. However, the maximum drawdown of -36.92% indicates significant volatility, which can be concerning during market corrections. To mitigate potential losses, it's essential to review the portfolio's risk tolerance and consider strategies to reduce volatility, such as rebalancing or incorporating more defensive assets.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio shows promising potential for future growth. The simulation provides a range of possible outcomes, with the 50th percentile indicating a 416.17% return. This suggests that, while the portfolio carries risk, it also offers substantial upside potential. Monte Carlo simulations are useful for understanding the range of possible outcomes and preparing for uncertainty. For continued success, consider periodically reviewing the portfolio's performance against these projections and adjusting as needed to stay aligned with financial goals.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio is heavily weighted in stocks, with 99.43% of assets in equities, indicating a strong growth orientation. This allocation suggests a high-risk, high-reward strategy that could lead to significant gains but also increased volatility. While equities offer growth potential, it's crucial to maintain a balanced approach by considering other asset classes like bonds or cash equivalents. Diversifying across asset classes can help reduce risk and provide more stability, especially during periods of market uncertainty or downturns.

Sectors Info

  • Technology
    27%
  • Financials
    18%
  • Consumer Discretionary
    13%
  • Industrials
    11%
  • Telecommunications
    7%
  • Health Care
    7%
  • Energy
    6%
  • Basic Materials
    5%
  • Consumer Staples
    4%
  • Real Estate
    1%
  • Utilities
    1%

The sector allocation is diverse, with technology, financial services, and consumer cyclicals being the top three sectors. This diversification across sectors can help mitigate risks associated with any single industry. However, the heavy concentration in technology at 26.89% could lead to increased volatility, as this sector is often more sensitive to market fluctuations. To improve sector balance, consider periodically reviewing and adjusting sector allocations to ensure they align with broader market trends and personal risk tolerance.

Regions Info

  • North America
    80%
  • Asia Emerging
    6%
  • Europe Developed
    6%
  • Asia Developed
    3%
  • Japan
    2%
  • Latin America
    1%
  • Africa/Middle East
    1%
  • Australasia
    1%

Geographically, the portfolio is concentrated in North America, which accounts for 80.29% of the allocation. While this focus on U.S. markets has been beneficial historically, it may limit exposure to growth opportunities in other regions. Emerging markets, for example, offer potential for higher returns, albeit with increased risk. Diversifying geographically can help capture a broader range of growth opportunities and reduce the impact of regional economic downturns. Consider gradually increasing exposure to international markets to enhance global diversification.

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 suggests that there is room for improvement in terms of risk-return balance. Moving along the efficient frontier can help achieve a more optimized portfolio by adjusting the mix of assets to either increase returns or reduce risk. For a riskier portfolio, consider increasing exposure to growth-oriented assets, while a more conservative approach might involve adding bonds or other defensive assets. Before optimizing, focus on ensuring the portfolio aligns with financial goals and risk tolerance, as these factors are crucial for successful long-term investing.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Schwab U.S. Large-Cap Growth ETF 0.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.70%
  • Weighted yield (per year) 1.28%

The portfolio's dividend yield stands at 1.28%, with contributions from all four ETFs. While the yield is modest, it provides a steady stream of income that can be reinvested to enhance long-term growth. Dividends can offer some downside protection during market declines, as they represent a return on investment regardless of market conditions. To maximize dividend income, consider periodically reviewing the portfolio's yield and exploring opportunities to increase exposure to dividend-paying securities, balancing growth and income objectives.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Schwab U.S. Large-Cap Growth ETF 0.04%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.12%

The total expense ratio (TER) of the portfolio is 0.12%, which is relatively low and indicates cost-effective management. Keeping investment costs low is crucial for maximizing net returns over time, as high fees can erode gains. The low TER suggests that the portfolio is well-structured to provide value to investors. To maintain cost efficiency, continue monitoring expense ratios and consider low-cost alternatives when making adjustments or adding new investments to the portfolio.

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