Balanced diversified portfolio with strong small cap value focus and low-cost structure

Report created on Jan 5, 2025

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards small cap value ETFs, comprising 70% of the allocation, with significant positions in broad market ETFs. This composition suggests a focus on capturing higher growth potential from smaller companies, which may offer higher returns but also come with increased volatility. Compared to a typical balanced portfolio, which often includes a mix of stocks and bonds, this portfolio is heavily equity-focused. A more balanced asset mix could enhance stability. Consider integrating bonds or alternative assets to diversify and reduce risk exposure.

Growth Info

Historically, the portfolio has performed well, achieving a Compound Annual Growth Rate (CAGR) of 9.52%. This rate is impressive, indicating strong growth potential over time. However, the maximum drawdown of -23.75% highlights the portfolio's vulnerability during market downturns. This performance suggests resilience in growth periods but exposure to significant risks during downturns. Comparing these figures to a benchmark like the S&P 500 can provide context on relative performance. To mitigate potential losses, consider incorporating more defensive assets or strategies.

Projection Info

The Monte Carlo simulation projects a wide range of potential outcomes, with a median (50th percentile) return of 118.27% and a 5th percentile loss of -36.18%. This tool uses historical data to simulate future performance, but it's important to remember that past performance doesn't guarantee future results. With 867 out of 1,000 simulations showing positive returns, the outlook is generally favorable. However, the potential for significant losses exists. Regularly reviewing and adjusting the portfolio in response to market changes can help manage these risks.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly invested in stocks (99.57%), with negligible exposure to bonds and other asset classes. This heavy equity focus can lead to higher returns but also increases risk and volatility. A more diversified asset allocation, including bonds or alternative investments, could provide stability and reduce risk. Compared to typical balanced portfolios, which often include a mix of equities and fixed income, this portfolio is less diversified. Consider gradually incorporating more asset classes to enhance diversification and manage risk.

Sectors Info

  • Financials
    21%
  • Technology
    16%
  • Industrials
    15%
  • Consumer Discretionary
    13%
  • Energy
    8%
  • Basic Materials
    7%
  • Health Care
    7%
  • Consumer Staples
    5%
  • Telecommunications
    5%
  • Real Estate
    2%
  • Utilities
    2%

Sector allocation shows a balanced distribution, with financial services, technology, and industrials as the top holdings. This diversification across sectors can help mitigate risks associated with sector-specific downturns. However, the portfolio is underweight in typically defensive sectors like utilities and consumer staples, which can offer stability during volatile periods. Aligning sector weights closer to global benchmarks can improve resilience. Regularly reviewing sector performance and adjusting allocations can help maintain balance and capitalize on emerging trends.

Regions Info

  • North America
    72%
  • Europe Developed
    10%
  • Japan
    6%
  • Asia Emerging
    5%
  • Asia Developed
    3%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

Geographically, the portfolio has a strong focus on North America (71.57%), with limited exposure to other regions. This concentration may limit diversification benefits and expose the portfolio to regional economic risks. A more globally diversified allocation could reduce risk and capture growth opportunities in other markets. Compared to global benchmarks, which often have broader geographic exposure, this portfolio may benefit from increasing its international allocation. Consider gradually increasing exposure to underrepresented regions for better diversification.

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 can be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio with the current assets. This optimization focuses on reallocating existing holdings to maximize returns for a given level of risk. The Efficient Frontier doesn't necessarily ensure diversification, but it helps in identifying the most efficient asset mix. Regularly revisiting this optimization can help maintain an ideal balance as market conditions change. Consider using optimization tools to refine asset allocation and enhance performance.

Dividends Info

  • Avantis® International Small Cap Value ETF 4.30%
  • Avantis® Emerging Markets Value ETF 1.00%
  • Avantis® U.S. Small Cap Value ETF 1.60%
  • Vanguard Total Stock Market Index Fund ETF Shares 1.30%
  • Vanguard Total International Stock Index Fund ETF Shares 3.40%
  • Weighted yield (per year) 2.03%

The portfolio's overall dividend yield is 2.03%, with contributions from various ETFs. This yield can provide a steady income stream, which is particularly beneficial during volatile markets. High dividend yields can indicate strong cash flow and financial health of underlying companies. However, focusing solely on dividend yield can lead to concentration in specific sectors. Balancing dividend-paying stocks with growth-oriented investments can enhance total returns. Consider reviewing the dividend yield regularly to ensure it aligns with income goals.

Ongoing product costs Info

  • Avantis® International Small Cap Value ETF 0.36%
  • Avantis® Emerging Markets Value ETF 0.36%
  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard Total Stock Market Index Fund ETF Shares 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.17%

The portfolio's total expense ratio (TER) is impressively low at 0.17%. This cost efficiency supports better long-term returns, as lower fees mean more of the portfolio's earnings are retained. The Vanguard ETFs contribute significantly to this low cost structure, demonstrating the benefit of using low-cost index funds. Keeping costs low is a key principle of successful investing. Regularly reviewing and comparing fund fees can help maintain cost efficiency. Consider replacing high-fee assets with lower-cost alternatives to optimize returns.

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