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A growth-focused US-centric portfolio with high technology exposure and limited geographic diversification

Report created on Jan 16, 2025

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

1/5
Single-Focused
Less diversification More diversification
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Positions

This portfolio is heavily weighted towards equities, with 89.77% in stocks and only 9.85% in bonds. The dominant position is the Vanguard S&P 500 ETF, making up 60% of the portfolio. While this composition aligns with a growth-focused strategy, it lacks diversification across asset classes, with minimal exposure to bonds and other asset types. A typical balanced portfolio might include more bonds and alternative assets, providing a buffer against market volatility. To enhance resilience, consider introducing more bond exposure or alternative investments to balance the risk-reward profile.

Growth Info

Historically, the portfolio has performed well, with a Compound Annual Growth Rate (CAGR) of 15.29%. This indicates strong growth, but it comes with a maximum drawdown of -31.86%, highlighting potential volatility. Benchmarking against a broad market index, this performance is commendable, yet the high drawdown suggests a need for caution. Diversifying further could help mitigate such downturns. While past performance doesn't guarantee future results, maintaining a diversified approach can enhance stability and potentially improve risk-adjusted returns.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential outcomes, suggests a 50th percentile end portfolio value of 476.36%. With 979 out of 1,000 simulations showing positive returns, the outlook appears optimistic. However, simulations are based on past data and assumptions, which might not reflect future market conditions. Consider this as a range of possibilities rather than a prediction. To prepare for uncertainties, regularly review and adjust the portfolio to align with evolving market trends and personal financial goals.

Asset classes Info

  • Stocks
    90%
  • Bonds
    10%

The portfolio's allocation is heavily skewed towards stocks, with minimal bond exposure. This imbalance suggests high growth potential but also increased risk. Compared to a diversified benchmark, which typically includes a mix of stocks, bonds, and other assets, this portfolio may be more susceptible to market swings. To enhance diversification, consider increasing bond allocation or exploring alternative asset classes. This can provide a cushion during market downturns and improve the overall risk-return profile.

Sectors Info

  • Technology
    30%
  • Financials
    13%
  • Health Care
    9%
  • Consumer Discretionary
    9%
  • Industrials
    8%
  • Telecommunications
    7%
  • Consumer Staples
    5%
  • Energy
    4%
  • Real Estate
    2%
  • Basic Materials
    2%
  • Utilities
    2%
  • Consumer Discretionary
    1%

The technology sector dominates the portfolio, representing 29.54% of the allocation. This concentration can lead to higher volatility, especially during interest rate changes or tech sector downturns. While tech has strong growth prospects, diversifying across more sectors can reduce risk. The portfolio's sectoral balance is closer to a tech-heavy benchmark, but increasing exposure to underrepresented sectors like utilities or real estate could provide stability. Assess sector trends regularly to ensure alignment with market conditions and personal investment objectives.

Regions Info

  • North America
    89%

The portfolio is predominantly North America-focused, with 89.36% allocated to the region. This concentration limits geographic diversification, potentially missing out on growth opportunities in other regions. Compared to a global benchmark, which typically includes more international exposure, this portfolio could benefit from diversifying geographically. Introducing more assets from Europe, Asia, or emerging markets can enhance diversification and reduce region-specific risks. This broader exposure can also capture growth in developing economies, balancing the overall portfolio risk.

Redundant positions Info

  • Vanguard Total Stock Market Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the Vanguard Total Stock Market Index Fund ETF and the Vanguard S&P 500 ETF. Correlation measures how assets move together; high correlation can limit diversification benefits, especially during downturns. When assets are too similar, the portfolio may not be as resilient to market fluctuations. Consider replacing or reducing the weight of overlapping assets to enhance diversification. This strategy can help manage risk and improve the overall portfolio's resilience to market volatility.

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.

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The portfolio could benefit from optimization using the Efficient Frontier, which seeks the best risk-return ratio. Currently, the portfolio's asset allocation may not fully exploit this potential due to overlapping investments. By adjusting the weights and reducing highly correlated assets, the portfolio can achieve a more efficient balance. This doesn't necessarily mean adding new assets but reallocating existing ones for better performance. Regularly reassess the portfolio to ensure it remains aligned with the optimal risk-return balance, adapting to changing market conditions.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Bond Market Index Fund ETF Shares 3.70%
  • Schwab U.S. Dividend Equity ETF 3.60%
  • VANGUARD EXTENDED MARKET INDEX FUND INSTITUTIONAL PLUS SHARES 0.80%
  • Vanguard Information Technology Index Fund ETF Shares 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.55%

The portfolio's total dividend yield is 1.55%, with contributions from various ETFs, such as the Schwab U.S. Dividend Equity ETF at 3.6%. Dividends can provide a steady income stream and contribute to total returns, especially in volatile markets. While the yield is modest, it aligns with a growth-focused strategy where capital appreciation is prioritized. To enhance income, consider increasing allocation to higher-yielding assets. However, ensure this aligns with your risk tolerance and growth objectives, as higher yields often come with increased risk.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Bond Market Index Fund ETF Shares 0.03%
  • Schwab U.S. Dividend Equity ETF 0.06%
  • VANGUARD EXTENDED MARKET INDEX FUND INSTITUTIONAL PLUS SHARES 0.04%
  • Vanguard Information Technology Index Fund ETF Shares 0.10%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is an impressively low 0.05%, indicating cost-efficiency. Low costs can significantly enhance long-term returns, as fees compound over time. This aligns well with best practices, ensuring more of your investment works for you. While the current costs are favorable, continue to monitor them, as lower-cost alternatives may emerge. Regularly reviewing and comparing fees can help maintain cost-effectiveness and improve net returns, supporting better financial outcomes over the investment horizon.

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