Balanced and Broadly Diversified Portfolio with Strong Historic Performance and Moderate Risk Suitable for Long-Term Growth

Report created on Jul 10, 2024

Risk profile

  • Secure
    Speculative

The risk profile, derived from past market volatility, reflects the level of risk the portfolio is exposed to. This assessment helps align your investments with your financial goals and comfort with market fluctuations.

Diversification profile

  • Focused
    Diversified

The diversification assessment evaluates the spread of investments across asset classes, regions, and sectors. This ensures a balanced mix, reducing risk and maximizing returns by not concentrating in any single area.

Positions

The portfolio is composed of four ETFs, with the Vanguard Total Stock Market Index Fund ETF Shares making up 50% of the allocation. This is complemented by the Avantis® U.S. Small Cap Value ETF at 20%, BNY Mellon International Equity ETF at 20%, and Avantis® International Small Cap Value ETF at 10%. This mix provides a broad exposure to both domestic and international markets, offering a diversified approach to investing. The balanced nature of this portfolio suggests a strategic allocation aimed at achieving moderate growth while managing risk.

Growth Info

Historically, the portfolio has delivered impressive performance with a compound annual growth rate (CAGR) of 19.65%. This indicates that a hypothetical initial investment would have grown significantly over time. However, the maximum drawdown of -24.24% highlights the potential for notable fluctuations in value. This performance suggests that while the portfolio has provided strong returns, it also carries the risk of substantial short-term losses. Investors should be prepared for these fluctuations and focus on long-term growth.

Projection Info

A Monte Carlo simulation, which uses random sampling to predict future outcomes, was conducted with 1,000 simulations assuming a hypothetical initial investment. The results indicate a median return of 1,120.34%, with 999 simulations showing positive returns. The annualized return across all simulations is 21.15%, suggesting a strong potential for future growth. However, as with any projection, these outcomes are not guaranteed and should be viewed as one of many possible scenarios.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.67% of the assets in this class. This allocation reflects a preference for equity investments, which typically offer higher potential returns but also come with increased volatility. The minimal allocations to cash, bonds, and other asset classes indicate a focus on growth rather than income or capital preservation. Investors seeking a more balanced approach might consider increasing exposure to bonds or other less volatile asset classes.

Sectors Info

  • Technology
    19%
  • Financials
    19%
  • Industrials
    14%
  • Consumer Discretionary
    12%
  • Health Care
    9%
  • Energy
    7%
  • Telecommunications
    6%
  • Basic Materials
    6%
  • Consumer Staples
    6%
  • Real Estate
    2%
  • Utilities
    2%

The sector allocation of the portfolio is diverse, with significant investments in technology (18.93%), financial services (18.70%), and industrials (13.91%). This distribution provides exposure to a variety of economic sectors, reducing the risk associated with overconcentration in a single area. The presence of consumer cyclicals, healthcare, and energy further enhances diversification. This balanced sector allocation supports the portfolio's goal of achieving steady growth while mitigating sector-specific risks.

Regions Info

  • North America
    73%
  • Europe Developed
    15%
  • Japan
    8%
  • Australasia
    2%
  • Asia Developed
    1%
  • Africa/Middle East
    1%

The geographic composition is predominantly focused on North America, which accounts for 72.94% of the portfolio. This is complemented by exposure to Europe Developed (15.08%), Japan (7.58%), and smaller allocations to other regions. This regional distribution provides a well-rounded exposure to both domestic and international markets, enhancing diversification. However, the heavy weighting towards North America could expose the portfolio to region-specific risks. A more balanced geographic allocation could help mitigate such risks.

Redundant positions Info

  • BNY Mellon International Equity ETF
    Avantis® International Small Cap Value ETF
    High correlation

The portfolio contains highly correlated assets, particularly between the BNY Mellon International Equity ETF and the Avantis® International Small Cap Value ETF. This correlation suggests that these assets tend to move in the same direction, which can impact diversification benefits. While correlated assets can enhance returns during positive market conditions, they can also amplify losses during downturns. Investors might consider diversifying further to reduce the impact of correlated movements on the portfolio.

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.

Given the presence of highly correlated assets, optimizing the portfolio may not be necessary at this point. Instead, focusing on maintaining diversification and managing risk should be the priority. Investors can achieve a riskier or more conservative portfolio by adjusting allocations along the efficient frontier. However, it's crucial to ensure that any changes align with overall financial goals and risk tolerance. A disciplined approach will help maintain the balance between risk and reward.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.10%
  • Avantis® U.S. Small Cap Value ETF 1.50%
  • BNY Mellon International Equity ETF 2.90%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Weighted yield (per year) 1.84%

The portfolio's overall dividend yield is 1.84%, with individual yields ranging from 1.3% to 3.1% across the ETFs. This yield provides a modest income stream, supplementing potential capital gains. While not the primary focus, dividends can offer a level of stability during volatile market periods. Investors seeking higher income might consider increasing allocations to higher-yielding assets. However, it's important to balance income generation with growth potential to maintain the portfolio's overall objectives.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • BNY Mellon International Equity ETF 0.04%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Weighted costs total (per year) 0.11%

The portfolio's total expense ratio (TER) is 0.11%, indicating a low-cost structure. This cost efficiency is primarily driven by the Vanguard Total Stock Market Index Fund ETF Shares, which has a minimal expense ratio of 0.03%. Lower costs can significantly enhance net returns over time, making this portfolio attractive for cost-conscious investors. While the Avantis® ETFs have higher expense ratios, they still remain competitive. Maintaining low costs should remain a priority to optimize long-term performance.

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