A growth-focused portfolio with strong US exposure and limited emerging market diversification

Report created on Jan 14, 2025

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 predominantly of ETFs, with iShares Core S&P 500 ETF and Vanguard S&P 500 ETF making up a significant portion. This structure leans heavily towards large-cap US equities, which is typical for growth-focused portfolios. Compared to a balanced portfolio, it lacks diversification across asset classes, with almost all investments in stocks. While this aligns with growth objectives, it may expose the portfolio to higher volatility. Consider integrating additional asset classes, such as bonds or real estate, to mitigate risk and enhance resilience against market fluctuations.

Growth Info

The portfolio has demonstrated a strong historic performance, with a Compound Annual Growth Rate (CAGR) of 16.05%. This growth rate indicates robust returns, particularly when compared to typical market benchmarks. However, the maximum drawdown of -33.52% highlights potential vulnerability during market downturns. While past performance is informative, it's crucial to remember that it doesn't guarantee future results. To manage risk, consider strategies like diversification and regular portfolio reviews to ensure alignment with evolving market conditions and personal investment goals.

Projection Info

The Monte Carlo simulation, which uses historical data to project potential outcomes, suggests a wide range of future returns. With a median projection of 669.4% and a 5th percentile of 135.32%, the portfolio shows promise but also uncertainty. While nearly all simulations indicate positive returns, the variability underscores the importance of risk management. Regularly reassess your portfolio's alignment with your risk tolerance and goals. Remember, simulations are based on historical data and assumptions, so they should be one of several tools in your decision-making process.

Asset classes Info

  • Stocks
    100%

The portfolio's allocation is heavily skewed towards stocks, with over 99% invested in equities. This concentration in a single asset class can enhance growth potential but also increases vulnerability during market downturns. Compared to diversified portfolios that include bonds or alternative assets, this allocation may experience higher volatility. To enhance stability, consider incorporating other asset classes. Diversifying across different types of investments can reduce risk and improve the risk-return profile, particularly if market conditions shift unfavorably for equities.

Sectors Info

  • Technology
    30%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    9%
  • Consumer Staples
    6%
  • Energy
    3%
  • Basic Materials
    3%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation reveals a strong emphasis on technology, which comprises nearly 30% of the portfolio. While this can drive growth, especially in tech-driven markets, it also introduces sector-specific risks. For instance, tech-heavy portfolios may be more volatile during regulatory changes or interest rate hikes. Other sectors like financial services and consumer cyclicals are also well-represented, providing some balance. To mitigate sector concentration risks, consider diversifying into underrepresented sectors that may offer stability or growth opportunities in varying economic conditions.

Regions Info

  • North America
    80%
  • Europe Developed
    8%
  • Asia Emerging
    4%
  • Japan
    3%
  • Asia Developed
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%

The portfolio's geographic exposure is predominantly in North America, accounting for over 80% of the allocation. This concentration provides stability from developed markets but limits exposure to potentially high-growth regions like emerging markets. While developed markets offer reliability, emerging markets can add growth potential and diversification benefits. Consider increasing exposure to regions like Asia or Latin America to capture growth opportunities and reduce geographic concentration risks. This can enhance overall diversification and align with a global investment strategy.

Redundant positions Info

  • iShares Core S&P 500 ETF
    iShares MSCI USA Quality Factor ETF
    Vanguard Russell 1000 Growth Index Fund ETF Shares
    Vanguard S&P 500 ETF
    High correlation

The portfolio includes several highly correlated assets, particularly among US equity ETFs. High correlation means these assets tend to move in the same direction, which can limit diversification benefits. In market downturns, correlated assets may not provide the risk mitigation that diverse holdings can. To optimize diversification, consider replacing some highly correlated ETFs with assets that have lower correlations. This adjustment can enhance the portfolio's resilience and improve the risk-return profile by reducing the impact of market-specific events on overall 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.

Before optimizing for risk-return balance using the Efficient Frontier, focus on reducing overlap among highly correlated assets. The Efficient Frontier helps identify the best possible risk-return ratio based on current assets. However, this optimization is limited to the existing portfolio composition. By first addressing correlation issues, you can enhance diversification, which is crucial for optimizing the portfolio's efficiency. After adjustments, consider using optimization tools to further refine asset allocation and align with your risk tolerance and investment objectives.

Dividends Info

  • iShares Core S&P 500 ETF 1.30%
  • iShares MSCI USA Quality Factor ETF 1.00%
  • Invesco S&P 500® Momentum ETF 0.50%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 1.90%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.40%
  • Vanguard S&P 500 ETF 1.30%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 3.30%
  • Weighted yield (per year) 1.42%

The portfolio's overall dividend yield is 1.42%, with the Vanguard FTSE Emerging Markets Index Fund ETF Shares contributing the highest yield at 3.3%. While dividends provide a steady income stream, this portfolio's focus is primarily on growth, as evidenced by its asset allocation. For investors seeking income, considering higher-yielding assets could be beneficial. However, the current yield aligns with a growth-oriented strategy, where capital appreciation is prioritized over income generation. Regularly reviewing dividend contributions can help ensure they meet your evolving investment needs.

Ongoing product costs Info

  • iShares Core S&P 500 ETF 0.03%
  • iShares MSCI USA Quality Factor ETF 0.15%
  • Invesco S&P 500® Momentum ETF 0.13%
  • Vanguard FTSE Developed Markets Index Fund ETF Shares 0.05%
  • Vanguard Russell 1000 Growth Index Fund ETF Shares 0.08%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard FTSE Emerging Markets Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.05%

The portfolio's total expense ratio (TER) is impressively low at 0.05%, which supports long-term performance by minimizing costs. Low fees are advantageous as they enable more of the portfolio's returns to be reinvested, compounding over time. This cost efficiency is a positive aspect of the portfolio, aligning with best practices for maximizing net returns. Keep monitoring expense ratios to ensure they remain competitive. If any holdings increase fees, consider alternatives that offer similar exposure at a lower cost to maintain the portfolio's cost-effectiveness.

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