A growth-oriented portfolio with high US equity exposure and moderate international diversification

Report created on Dec 8, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

This portfolio is heavily weighted towards US equities, with 70% allocated to the Vanguard S&P 500 ETF. It includes some international exposure through the Vanguard Total International Stock Index Fund ETF at 20%, and a smaller allocation to US small-cap value stocks via the Avantis U.S. Small Cap Value ETF, making up 10%. This composition suggests a strong focus on growth, leveraging large-cap US stocks while diversifying slightly with international and small-cap value stocks. To enhance diversification, consider increasing the allocation to international markets or other asset classes like bonds to balance potential volatility.

Growth Info

Historically, this portfolio has shown strong performance, with a compound annual growth rate (CAGR) of 15.94%. This indicates robust growth over time, although it has experienced a significant maximum drawdown of -35.06%. The high CAGR is a testament to the portfolio's growth orientation, primarily driven by US equities. However, the drawdown highlights the inherent risk, particularly during market downturns. Investors should be prepared for volatility and consider their risk tolerance when evaluating such performance metrics.

Projection Info

The forward projection using Monte Carlo simulations shows a wide range of potential outcomes, with the 5th percentile at 32.46% and the 67th percentile at 815.6%. Monte Carlo analysis uses historical data to simulate future performance, providing a range of possible returns. While 969 out of 1,000 simulations resulted in positive returns, it's important to remember that past performance does not guarantee future results. Investors should use these projections as one of many tools to assess potential risks and returns.

Asset classes Info

  • Stocks
    100%

The portfolio is predominantly composed of stocks, with 99.63% allocated to equities. This heavy allocation to a single asset class indicates a focus on capital appreciation, but it also increases exposure to market volatility. The minimal allocation to cash and other asset classes suggests limited liquidity and defensive positioning. To mitigate risk, consider diversifying into other asset classes such as bonds or real estate, which can provide stability and income during market fluctuations.

Sectors Info

  • Technology
    26%
  • Financials
    16%
  • Consumer Discretionary
    11%
  • Industrials
    10%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    4%
  • Utilities
    3%
  • Real Estate
    2%

Sector allocation is concentrated in technology (26.35%), financial services (16.07%), and consumer cyclicals (10.93%). This concentration reflects a growth-oriented strategy, capitalizing on sectors with high potential returns. However, it also exposes the portfolio to sector-specific risks, particularly if these industries face downturns. A more balanced sector allocation could reduce risk by spreading exposure across a broader range of industries, potentially improving resilience against sector-specific volatility.

Regions Info

  • North America
    81%
  • Europe Developed
    8%
  • Asia Emerging
    3%
  • Japan
    3%
  • Asia
    2%
  • Australasia
    1%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio's geographic exposure is heavily skewed towards North America, accounting for 80.93% of the allocation. While this benefits from the stability and growth of US markets, it limits exposure to international opportunities. A more geographically diversified portfolio could capture growth in emerging markets and reduce reliance on the US economy. Consider increasing allocations to regions like Asia or Europe to enhance diversification and potentially tap into different economic cycles.

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.

This portfolio can potentially be optimized using the Efficient Frontier, which seeks the best possible risk-return ratio based on current assets. By adjusting the allocation between existing holdings, investors might achieve a more efficient portfolio that aligns with their risk tolerance and return expectations. However, optimization doesn't necessarily mean adding new assets; it focuses on reallocating current ones to achieve the desired balance between risk and return.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.50%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 2.90%
  • Weighted yield (per year) 1.57%

The portfolio's overall dividend yield stands at 1.57%, with contributions from all included ETFs. While not a primary focus, dividends provide a steady income stream that can enhance total returns, especially during periods of market volatility. Investors seeking higher income might consider increasing exposure to high-dividend sectors or funds. However, balancing growth and income is crucial to maintain the portfolio's growth-oriented profile while benefiting from dividend contributions.

Ongoing product costs Info

  • Avantis® U.S. Small Cap Value ETF 0.25%
  • Vanguard S&P 500 ETF 0.03%
  • Vanguard Total International Stock Index Fund ETF Shares 0.08%
  • Weighted costs total (per year) 0.06%

The portfolio's total expense ratio (TER) is relatively low at 0.06%, primarily due to the low-cost Vanguard ETFs. This cost efficiency enhances long-term returns by minimizing fees that can erode gains over time. Low costs are a significant advantage, especially for long-term investors. To maintain this advantage, regularly review and compare expense ratios of current holdings with similar alternatives to ensure cost-effectiveness without compromising on performance or diversification.

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