A Balanced Portfolio with High U.S. Equity Exposure and Moderate Risk Suited for Growth-Oriented Investors

Report created on Dec 6, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is heavily invested in U.S. equities, with 70% allocated to the Vanguard S&P 500 ETF. This high concentration in a single ETF indicates a focus on large-cap U.S. stocks, which are generally considered stable and offer growth potential. The remaining 30% is spread equally among three other ETFs, each targeting different market segments. This composition suggests a moderate diversification approach, but with a strong bias towards U.S. equities. To enhance diversification, consider adding other asset classes like bonds or international stocks, which could reduce risk and potentially improve returns.

Growth Info

Historically, the portfolio has performed well, with a compound annual growth rate (CAGR) of 17.19%. This impressive performance suggests that the portfolio has benefited from favorable market conditions, particularly in the U.S. equity markets. However, the maximum drawdown of -24.24% indicates that the portfolio is not immune to market volatility. To mitigate future risks, consider implementing strategies to protect against downturns, such as diversifying into less correlated assets or incorporating defensive investments that could provide stability during market turbulence.

Projection Info

Using a Monte Carlo simulation, which forecasts potential future performance based on historical data, the portfolio shows promising growth prospects. With a hypothetical initial investment, the 50th percentile projection is a 930.87% increase, and even the conservative 5th percentile projects a 176.66% gain. This suggests a high likelihood of positive returns, with 998 out of 1,000 simulations yielding gains. Despite these optimistic projections, it's important to remember that past performance doesn't guarantee future results. Regularly review and adjust the portfolio to align with evolving market conditions and personal financial goals.

Asset classes Info

  • Stocks
    100%

The portfolio's asset allocation is heavily skewed towards stocks, with 99.92% invested in equities and a negligible 0.08% in cash. This allocation indicates a focus on growth, as equities generally offer higher returns over the long term compared to other asset classes. However, the lack of diversification across asset classes could expose the portfolio to significant market volatility. To reduce risk and enhance stability, consider incorporating other asset classes such as bonds or real estate, which can provide diversification benefits and potentially improve the risk-return profile.

Sectors Info

  • Technology
    29%
  • Industrials
    18%
  • Financials
    12%
  • Consumer Discretionary
    10%
  • Health Care
    9%
  • Telecommunications
    8%
  • Consumer Staples
    5%
  • Energy
    4%
  • Basic Materials
    2%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation is concentrated, with technology making up 28.85% of the portfolio, followed by industrials at 17.53%. This reflects a strong bias towards sectors that have historically driven growth in the U.S. economy. While this concentration can lead to significant gains during favorable market conditions, it also increases exposure to sector-specific risks. To mitigate these risks, consider diversifying into underrepresented sectors, which could provide a more balanced exposure and reduce the impact of adverse developments in any single sector on the overall portfolio performance.

Regions Info

  • North America
    99%
  • Europe Developed
    1%

Geographically, the portfolio is overwhelmingly concentrated in North America, with 99.13% of assets allocated to this region. This heavy focus on the U.S. market suggests a strong belief in its continued growth potential. However, such concentration increases vulnerability to regional economic downturns or geopolitical events. To enhance geographic diversification, consider allocating a portion of the portfolio to international markets. This can provide exposure to different economic cycles and growth opportunities, potentially reducing risk and enhancing returns through a more balanced global allocation.

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 optimization chart suggests that there is room for improvement by adjusting the asset allocation along the efficient frontier. By reallocating investments, the portfolio can achieve a more optimal balance between risk and return. To pursue a riskier approach, consider increasing exposure to high-growth assets, while a more conservative strategy might involve adding bonds or defensive stocks. Before making changes, it's essential to evaluate personal risk tolerance and financial goals. Focusing on these areas can lead to a more tailored and efficient investment strategy, enhancing long-term performance.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Invesco NASDAQ 100 ETF 0.60%
  • Vanguard S&P 500 ETF 1.20%
  • SPDR® S&P Aerospace & Defense ETF 0.50%
  • Weighted yield (per year) 1.10%

The portfolio's dividend yield stands at 1.1%, with contributions from each ETF, led by the Avantis U.S. Small Cap Value ETF at 1.5%. While the primary focus seems to be on capital appreciation, dividends can provide a reliable income stream and contribute to total returns, especially in volatile markets. To enhance income potential, consider increasing exposure to dividend-paying stocks or funds, which could provide regular cash flow and add a layer of stability to the portfolio, particularly during periods of market uncertainty or low growth.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Invesco NASDAQ 100 ETF 0.15%
  • Vanguard S&P 500 ETF 0.03%
  • SPDR® S&P Aerospace & Defense ETF 0.35%
  • Weighted costs total (per year) 0.10%

The portfolio's total expense ratio (TER) is relatively low at 0.1%, reflecting cost-effective management. The Vanguard S&P 500 ETF, with a TER of 0.03%, is particularly cost-efficient. Low costs are crucial for maximizing returns, as they can significantly impact long-term performance. Maintaining a focus on low-cost investments can help preserve more of the portfolio's gains. Consider periodically reviewing the expense ratios of all holdings to ensure they remain competitive. Opting for funds with lower fees can enhance net returns and contribute to achieving financial goals more effectively.

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