A growth-focused portfolio with strong US equity emphasis and moderate risk profile
Report created on Jan 23, 2025Risk profile
5/7
Diversification profile
4/5
Positions
-
VO Vanguard S&P 500 ETF
VOO - US9229083632 63.00% -
AV Avantis® U.S. Small Cap Value ETF
AVUV - US0250728773 12.00% -
IV Vanguard S&P Mid-Cap 400 Index Fund ETF Shares
IVOO - US9219328856 10.00% -
VE Vanguard FTSE Developed Markets Index Fund ETF Shares
VEA - US9219438580 8.00% -
VW Vanguard FTSE Emerging Markets Index Fund ETF Shares
VWO - US9220428588 7.00%
The portfolio is heavily weighted towards US equities, with the Vanguard S&P 500 ETF making up 63% of the total allocation. This provides a solid foundation of large-cap stocks, which are generally considered more stable. The inclusion of the Avantis U.S. Small Cap Value ETF and Vanguard S&P Mid-Cap 400 Index Fund ETF adds exposure to smaller companies, which can offer higher growth potential. The remaining 15% is allocated to international markets, providing some geographic diversification. While this composition is aligned with a growth strategy, it may benefit from increased exposure to non-US markets to further balance risks.
Growth
Historically, this portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.74%. This indicates strong returns compared to many benchmarks. However, it experienced a maximum drawdown of 35.99%, highlighting potential volatility during market downturns. The concentration in large-cap US equities has likely driven past performance, but it's important to remember that historical success doesn't guarantee future results. Keeping an eye on market conditions and adjusting allocations when necessary can help manage risk and sustain growth.
Projection
The portfolio's forward projection, based on a Monte Carlo simulation of 1,000 scenarios, suggests a wide range of potential outcomes. The median scenario projects a 366.5% increase, while the more optimistic outlook sees a 596.2% rise. However, the 5th percentile suggests a modest 5.1% gain, illustrating the uncertainty inherent in future predictions. While such simulations provide valuable insights, they rely on historical data, which may not reflect future market conditions. Regularly reviewing and adjusting the portfolio can help navigate these uncertainties and align with evolving investment goals.
Asset classes
- Stocks 100%
The portfolio is entirely composed of stocks, which aligns with a growth-oriented strategy. While stocks offer higher potential returns, they also come with greater risk compared to fixed-income assets like bonds. This allocation may suit investors comfortable with market fluctuations. However, introducing other asset classes could enhance diversification and reduce overall volatility. For instance, adding a small percentage of bonds or real assets might provide a buffer during equity market downturns, helping to preserve capital and stabilize returns over time.
Sectors
- Technology 25%
- Financials 17%
- Consumer Discretionary 12%
- Industrials 11%
- Health Care 9%
- Telecommunications 7%
- Consumer Staples 6%
- Energy 5%
- Basic Materials 3%
- Real Estate 3%
- Utilities 2%
Sector allocation is diverse, with technology leading at 25%, followed by financial services at 17%. This distribution aligns with common benchmarks, providing broad exposure to key economic sectors. However, the high concentration in technology could lead to increased volatility, especially during interest rate hikes or regulatory changes. Balancing this with more defensive sectors, like healthcare or consumer staples, could mitigate risk and enhance stability. Monitoring sector trends and adjusting allocations as needed can help maintain a balanced approach that aligns with market dynamics.
Regions
- North America 85%
- Europe Developed 5%
- Asia Emerging 4%
- Asia Developed 2%
- Japan 2%
- Africa/Middle East 1%
- Latin America 1%
- Australasia 1%
The portfolio's geographic allocation is heavily skewed towards North America at 85%, with limited exposure to other regions. This concentration may limit diversification benefits and expose the portfolio to regional risks. While the US market has been strong, diversifying into international markets, including emerging economies, could provide new growth opportunities and reduce dependence on the US economy. Increasing allocations to Europe or Asia could enhance geographic balance, potentially improving risk-adjusted returns and capturing global growth trends.
Market capitalization
- Mega-cap 36%
- Large-cap 26%
- Mid-cap 17%
- Small-cap 14%
- Micro-cap 6%
Market capitalization exposure is well-distributed, with 36% in mega-cap stocks and a healthy mix across large, medium, small, and micro-cap companies. This variety supports diversification, as different-sized companies tend to perform differently under varying market conditions. While large caps offer stability, smaller companies often provide higher growth potential. Maintaining this balance is beneficial, but monitoring shifts in market dynamics can help optimize allocations. Adjusting exposure to capitalize on emerging opportunities or mitigate risks can enhance overall portfolio performance.
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 risk-return profile can be optimized using the Efficient Frontier concept, which aims to find the best possible risk-return ratio with the current assets. This involves adjusting allocations to achieve higher returns for the same level of risk or reducing risk for the same return. While the portfolio is already well-structured for growth, exploring minor allocation shifts could enhance efficiency. It's important to remember that optimization focuses on maximizing returns relative to risk, not necessarily achieving the widest diversification.
Dividends
- Avantis® U.S. Small Cap Value ETF 1.60%
- Vanguard S&P Mid-Cap 400 Index Fund ETF Shares 1.40%
- Vanguard FTSE Developed Markets Index Fund ETF Shares 1.80%
- Vanguard S&P 500 ETF 1.20%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.20%
- Weighted yield (per year) 1.46%
With a total dividend yield of 1.46%, the portfolio provides some income, though it is primarily growth-focused. Dividend-paying stocks can offer a buffer during market volatility and contribute to overall returns. The Vanguard FTSE Emerging Markets Index Fund ETF, with a yield of 3.20%, is the highest contributor. While dividends are not the main focus, they can enhance total returns and provide cash flow. Investors seeking higher income might consider increasing exposure to high-dividend sectors or funds, balancing growth with income generation.
Ongoing product costs
- Avantis® U.S. Small Cap Value ETF 0.25%
- Vanguard S&P Mid-Cap 400 Index Fund ETF Shares 0.10%
- Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
- Vanguard S&P 500 ETF 0.03%
- Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
- Weighted costs total (per year) 0.07%
The portfolio's total expense ratio (TER) is impressively low at 0.07%, supporting better long-term performance by minimizing costs. Lower fees mean more of your investment returns stay in your pocket, compounding over time. The Vanguard S&P 500 ETF, with a TER of 0.03%, exemplifies cost-efficient investing. While costs are well-managed, it's crucial to remain vigilant about fee changes or the introduction of higher-cost funds. Continuously seeking cost-effective investment options can further enhance net returns and contribute to achieving financial goals.
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