Balanced Risk Growth Portfolio with Strong Diversification and Impressive Historical Returns

Report created on Nov 30, 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, with a significant allocation towards U.S. large-cap growth and small-cap value stocks, making up 85% of the total. This allocation suggests a focus on growth with a substantial tilt towards domestic equities. The remaining 15% is allocated to developed and emerging markets, offering some international exposure. This composition reflects a broadly diversified strategy, aiming to capture growth across different market segments. To enhance diversification, consider balancing domestic and international allocations further while maintaining a focus on growth opportunities.

Growth Info

With a historical CAGR of 19.47% and a max drawdown of -37.56%, the portfolio has delivered impressive returns, albeit with significant volatility. This performance underscores the potential for substantial gains, but also highlights the risks associated with a growth-focused strategy. Understanding past performance helps in setting realistic expectations for future returns. To mitigate volatility, consider diversifying further across asset classes or incorporating more defensive positions to reduce drawdowns during market downturns.

Projection Info

A Monte-Carlo simulation, which uses random sampling to predict future performance, suggests a wide range of potential outcomes for a hypothetical initial investment. The 50th percentile projects a 424.93% return, indicating strong growth potential, while the 5th percentile shows a more conservative 25.55% return. This highlights the inherent uncertainty in market performance. To prepare for various scenarios, maintain a long-term perspective and ensure your investment strategy aligns with your risk tolerance and financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.55% in equities, reflecting a high-risk, high-reward profile suitable for growth-oriented investors. A small allocation to cash and other assets provides minimal diversification. This concentration in equities suggests a strong belief in market growth potential. To reduce risk, consider increasing exposure to other asset classes like bonds or real estate, which can offer stability and income, particularly during periods of market volatility.

Sectors Info

  • Technology
    26%
  • Financials
    18%
  • Consumer Discretionary
    14%
  • Industrials
    11%
  • Telecommunications
    7%
  • Health Care
    7%
  • Energy
    7%
  • Basic Materials
    5%
  • Consumer Staples
    3%
  • Real Estate
    1%
  • Utilities
    1%

Sector allocation is diverse, with a notable emphasis on technology, financial services, and consumer cyclicals, which together account for over half of the portfolio. This indicates a focus on sectors with strong growth prospects. However, there is limited exposure to more defensive sectors like utilities and real estate. To achieve a more balanced sector allocation, consider increasing exposure to sectors that traditionally perform well in different economic cycles, providing stability and reducing overall portfolio risk.

Regions Info

  • North America
    85%
  • Asia Emerging
    5%
  • Europe Developed
    4%
  • Asia Developed
    2%
  • Japan
    2%
  • Latin America
    1%
  • Africa/Middle East
    1%
  • Australasia
    1%

Geographically, the portfolio is predominantly invested in North America, with 84.9% allocation, reflecting a strong home bias. This concentration offers familiarity but limits exposure to growth opportunities in other regions. The remaining allocation is spread across various international markets, providing some diversification. To enhance geographic diversification, consider increasing exposure to emerging markets or other developed regions, which can offer growth potential and reduce reliance on the performance of the U.S. market.

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 potential for improvement by adjusting along the efficient frontier, balancing risk and return. Investors can achieve a riskier profile by increasing exposure to high-growth sectors or regions, or adopt a more conservative approach by incorporating bonds or defensive stocks. Before optimizing, ensure alignment with personal risk tolerance and financial goals. Consider consulting with a financial advisor to explore strategies that enhance diversification and manage risk effectively, optimizing the portfolio for long-term success.

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) 1.21%

The portfolio's overall dividend yield is 1.21%, with the highest contributions from the Vanguard FTSE Developed Markets and Emerging Markets ETFs. This yield provides a modest income stream, which can be reinvested to enhance returns over time. While the focus is on growth, incorporating dividend-paying assets can offer additional income and stability. To increase income potential, consider adding higher-yielding investments, but ensure they align with the overall growth strategy and risk tolerance.

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) 0.13%

With a total expense ratio of 0.13%, the portfolio is cost-effective, minimizing the drag on returns. The Schwab U.S. Large-Cap Growth ETF has the lowest expense ratio, contributing to overall cost efficiency. Keeping costs low is crucial for maximizing net returns over time. Regularly reviewing and optimizing expenses can help maintain this advantage. If considering new investments, prioritize low-cost options that align with your investment strategy, ensuring that fees do not erode the portfolio's growth potential.

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