A globally diversified value tilted equity heavy portfolio with modest duration bond exposure

Report created on Nov 7, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

5/5
Highly Diversified
Less diversification More diversification

Positions

Observation: The portfolio is concentrated in equity ETFs at roughly 95% equity and 5% bonds with seven distinct ETFs and a clear value tilt via multiple Avantis strategies. The largest single holding is a total world ETF at 30% with several value‑oriented small and large cap ETFs filling out the remainder. Education: A concentrated allocation across a few active value funds and a broad market ETF creates both targeted active exposures and passive market coverage which affects risk return and overlap. Recommendation: Consider simplifying overlapping exposures while keeping the broad market ETF as a core holding to maintain market coverage and reduce complexity.

Growth Info

Observation: Historical metrics show a strong compounded annual growth rate (CAGR) of 11.05% and a maximum drawdown of -23.85%. If a hypothetical $10,000 initial investment grew at 11.05% annually for ten years it would be roughly $28,500 illustrating the power of compounded returns. Education: CAGR (Compound Annual Growth Rate) measures average annual growth like an average speed over a multi‑year journey and max drawdown shows the steepest peak‑to‑trough loss. Recommendation: Use these metrics to set realistic return and risk expectations but remember past performance does not guarantee future results so avoid overfitting to recent outcomes.

Projection Info

Observation: Monte Carlo simulation with 1,000 runs projects a median total return of 165.3% and an overall annualized return across simulations of 9.25% with 931 runs positive; the 5th percentile outcome was -11.6%. Education: Monte Carlo simulates many possible future paths by sampling returns and correlations historically to estimate probabilities; it’s a probabilistic view not a prediction. Recommendation: Use these simulations as scenario planning tools rather than forecasts — stress test for low‑probability outcomes and consider outcome ranges when setting saving and withdrawal plans.

Asset classes Info

  • Stocks
    95%
  • Bonds
    5%

Observation: Asset class split is heavily equity oriented at 95% stocks and 5% bonds with essentially no cash. This deviates from many balanced benchmarks which often target meaningful fixed income allocation. Education: A high equity share raises expected long‑term returns but increases volatility and sequence of returns risk for near‑term withdrawals. Recommendation: Align the asset class mix to investment goals and time horizon; if capital preservation or lower short‑term volatility matters, gradually increase liquid fixed income or cash allocations rather than relying solely on equities.

Sectors Info

  • Financials
    20%
  • Industrials
    15%
  • Consumer Discretionary
    14%
  • Technology
    14%
  • Energy
    9%
  • Basic Materials
    7%
  • Telecommunications
    6%
  • Health Care
    5%
  • Consumer Staples
    4%
  • Utilities
    1%
  • Real Estate
    1%

Observation: Sector exposure is diversified across nine material sectors with Financial Services, Industrials, Consumer Cyclicals, and Technology forming the largest weights. Education: Sector composition affects sensitivity to economic cycles and interest rate moves; sector‑heavy portfolios can experience outsized swings when those industries face headwinds. Recommendation: Maintain a target sector mix consistent with risk tolerance and rebalance periodically to avoid unintended sector bets; consider non‑sector diversification tools if seeking to smooth volatility.

Regions Info

  • North America
    57%
  • Europe Developed
    15%
  • Japan
    8%
  • Asia Emerging
    6%
  • Asia Developed
    5%
  • Australasia
    2%
  • Africa/Middle East
    2%
  • Latin America
    1%

Observation: Geographic exposure tilts strongly to North America at 57% with the remainder spread across developed Europe, Japan, and smaller emerging allocations. Education: Geography affects sensitivity to local economic and policy conditions and currency movements; a domestic tilt can amplify home market cycles while reducing foreign diversification benefits. Recommendation: Compare geographic weights to long‑term strategic targets and rebalance toward those targets if necessary to maintain intended diversification and risk exposure.

Market capitalization Info

  • Mid-cap
    22%
  • Mega-cap
    21%
  • Large-cap
    21%
  • Small-cap
    18%
  • Micro-cap
    12%

Observation: Market cap distribution shows a meaningful spread with medium caps at 22% plus significant mega and large cap holdings each near 21% and small plus micro caps totaling about 30%. Education: Exposure to smaller caps tends to boost long‑term return potential but also increases volatility and liquidity considerations. Recommendation: Ensure market cap tilt aligns with liquidity needs and time horizon; if the plan calls for lower volatility, consider reducing the smallest cap exposure or rebalancing into larger more liquid holdings.

Redundant positions Info

  • Avantis International Large Cap
    Avantis® International Small Cap Value ETF
    High correlation

Observation: The analysis flagged a highly correlated international pair notably between the international large cap and international small cap Avantis ETFs indicating overlap. Education: Correlation measures how assets move together; highly correlated holdings provide limited diversification because they tend to fall or rise in sync during stress periods. Recommendation: Replace or consolidate overlapping ETFs with less correlated alternatives or a single diversified holding to improve true diversification benefits and reduce redundant active fees.

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.

Observation: Optimization notes recommend removing overlapping highly correlated assets before running mean‑variance optimization on the remaining holdings to enhance efficiency. Education: The Efficient Frontier is the set of portfolios that offer the highest expected return for a given level of risk based on historical return and volatility inputs; optimization here means reallocating among existing assets only, not adding new asset classes. Recommendation: First simplify by removing redundant funds then run constrained optimization and stress test solutions, remembering that estimated inputs are noisy and optimization should be combined with common sense limits and diversification rules.

Dividends Info

  • Avantis® International Small Cap Value ETF 3.30%
  • Avantis® Emerging Markets Value ETF 3.70%
  • Avantis International Large Cap 2.50%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 1.30%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 4.80%
  • Vanguard Total World Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 2.18%

Observation: Aggregate portfolio dividend yield is about 2.18% with several value and bond ETFs showing higher individual yields and the extended duration treasury ETF yielding roughly 4.8%. Education: Dividends contribute to total return and can smooth income but yields vary with strategy and interest rates; reinvested dividends fuel compounding while higher yields can indicate different risk profiles. Recommendation: Decide whether dividends should be reinvested for growth or taken as income; match dividend strategy to cash flow needs and tax considerations.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis International Large Cap 0.25%
  • American Century ETF Trust - Avantis U.S. Large Cap Value ETF 0.15%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Extended Duration Treasury Index Fund ETF Shares 0.06%
  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.19%

Observation: The portfolio’s weighted total expense ratio is low at roughly 0.19% with most ETFs carrying modest fees and a few active funds higher but still reasonable. Education: TER (Total Expense Ratio) captures annual management costs that directly reduce net returns over time much like a small drag on long trips; lower fees compound into meaningful savings over decades. Recommendation: Preserve the low‑cost advantage by monitoring for cheaper equivalents and by consolidating where overlap exists to avoid paying multiple active fees for similar exposures.

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