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

Report created on Dec 3, 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 98.36% stocks, 0.99% bonds, 0.62% cash, and a minimal portion classified as other. This setup indicates a strong preference for equities, aligning with a growth-oriented strategy. The inclusion of a small bond allocation provides a slight buffer against volatility, though the primary focus remains on stock investments. The broad diversification across multiple sectors and geographies adds resilience, reducing the impact of any single market event. To maintain this balance, regularly review the asset allocation and adjust as necessary to align with long-term goals and risk tolerance.

Growth Info

Historically, the portfolio has shown impressive performance, with a compound annual growth rate (CAGR) of 15.46%. However, it experienced a maximum drawdown of -32.14%, indicating vulnerability during market downturns. This highlights the importance of understanding the risk involved in a growth-focused portfolio. Despite the drawdowns, the overall positive returns suggest that the portfolio is well-suited for investors with a long-term horizon. To mitigate potential losses, consider diversifying further into less correlated assets, potentially including more bonds or other asset classes.

Projection Info

Using a Monte Carlo simulation with 1,000 iterations, the portfolio's future performance shows promising results. With a 50th percentile end value of 553.46% and 995 simulations yielding positive returns, the portfolio appears well-positioned for future growth. The annualized return across all simulations is 16.29%, indicating strong potential for long-term wealth accumulation. While these projections are not guaranteed, they provide a robust framework for understanding potential outcomes. To enhance future performance, consider maintaining a diversified approach and periodically reassessing the portfolio's alignment with personal financial goals.

Asset classes Info

  • Stocks
    98%
  • Bonds
    1%
  • Cash
    1%

The portfolio's asset allocation heavily favors stocks, comprising 98.36% of the total. This high equity exposure aligns with a growth-oriented strategy aimed at maximizing returns over the long term. The minimal bond allocation of 0.99% offers limited downside protection, suggesting a preference for capital appreciation over stability. To balance risk and return, consider increasing the bond allocation or introducing alternative investments. This can help cushion against market volatility while still allowing for growth potential. Regularly reviewing the asset class allocation ensures alignment with evolving financial objectives and risk tolerance.

Sectors Info

  • Technology
    33%
  • Financials
    13%
  • Consumer Discretionary
    10%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Basic Materials
    3%
  • Energy
    3%
  • Utilities
    2%
  • Real Estate
    2%

Sector allocation is diverse, with technology leading at 32.51%, followed by financial services, consumer cyclicals, and healthcare. This distribution reflects a strong emphasis on growth sectors, which can drive substantial returns. However, the concentration in technology could increase susceptibility to sector-specific risks. Diversifying further into underrepresented sectors like real estate or utilities may provide additional stability and reduce exposure to sector-specific downturns. By maintaining a balanced sector allocation, the portfolio can better withstand market fluctuations and capitalize on opportunities across various industries.

Regions Info

  • North America
    78%
  • Europe Developed
    7%
  • Asia Emerging
    6%
  • Asia Developed
    3%
  • Japan
    3%
  • Africa/Middle East
    1%
  • Australasia
    1%
  • Latin America
    1%

Geographically, the portfolio is heavily weighted towards North America, accounting for 77.99% of the allocation. This concentration exposes the portfolio to regional risks but also allows for participation in the robust North American market. The remaining exposure is spread across Europe, Asia, and other regions, offering some diversification benefits. To mitigate geographic concentration risk, consider increasing exposure to emerging markets or underrepresented regions. This can enhance diversification and potentially capture growth opportunities in less correlated markets, contributing to a more resilient portfolio.

Redundant positions Info

  • Vanguard Dividend Appreciation Index Fund ETF Shares
    Vanguard Total Stock Market Index Fund ETF Shares
    High correlation

The portfolio contains assets with notable correlations, particularly between the Vanguard Dividend Appreciation Index Fund and the Vanguard Total Stock Market Index Fund. High correlations can reduce diversification benefits, as assets may move in tandem during market shifts. To optimize diversification, consider reducing exposure to highly correlated assets and introducing investments with lower correlations to existing holdings. This strategy can help smooth portfolio volatility and improve risk-adjusted returns. Regularly assessing asset correlations ensures the portfolio remains diversified and aligned with long-term financial objectives.

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.

Before optimizing the portfolio, focus on reducing overlapping assets to enhance diversification. Moving along the efficient frontier can help achieve a riskier or more conservative portfolio, depending on personal preferences. By adjusting the asset allocation, investors can better align the portfolio with their risk tolerance and financial goals. Consider increasing bonds for a more conservative approach or reallocating to equities for higher risk and potential returns. Regularly reviewing the portfolio ensures it remains optimized for changing market conditions and personal objectives.

Dividends Info

  • Invesco QQQ Trust 0.60%
  • VanEck Semiconductor ETF 0.40%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 3.00%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 1.70%
  • Vanguard Tax-Exempt Bond Index Fund ETF Shares 3.10%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.20%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 2.60%
  • Weighted yield (per year) 1.47%

With a total dividend yield of 1.47%, the portfolio provides a modest income stream. The Vanguard FTSE Developed Markets Index Fund and the Vanguard Tax-Exempt Bond Index Fund offer the highest yields, contributing to income generation. While dividends are not the primary focus of a growth-oriented portfolio, they can provide additional returns and a buffer during market downturns. To enhance income potential, consider reallocating to higher-yielding assets or funds. Balancing dividend income with growth objectives ensures the portfolio remains aligned with financial goals and risk tolerance.

Ongoing product costs Info

  • Invesco QQQ Trust 0.20%
  • VanEck Semiconductor ETF 0.35%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%
  • Vanguard Tax-Exempt Bond Index Fund ETF Shares 0.05%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • 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 0.08%, reflecting an efficient cost structure. Low costs are crucial for maximizing returns, as they minimize the drag on portfolio performance. The Vanguard funds contribute to this low-cost structure, while the VanEck Semiconductor ETF has a higher expense ratio of 0.35%. To maintain cost efficiency, regularly review the expense ratios and consider reallocating to lower-cost alternatives if available. Keeping costs low ensures that more of the portfolio's returns are retained, supporting long-term wealth accumulation and financial success.

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