A growth-focused portfolio with high concentration in US equities and limited international exposure

Report created on Dec 18, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

3/5
Moderately Diversified
Less diversification More diversification

Positions

This portfolio is heavily skewed towards equities, with the Vanguard S&P 500 ETF making up 80% of the holdings. The rest is divided between the Avantis U.S. Small Cap Value ETF and the Vanguard Total International Stock Index Fund ETF Shares, each comprising 10%. This composition indicates a strong focus on US large-cap stocks, with modest exposure to small-cap value and international markets. A concentrated portfolio in equities can lead to higher growth potential but also increases volatility. To balance this, consider diversifying into other asset classes like bonds or real estate to reduce risk.

Growth Info

Historically, this portfolio has shown a Compound Annual Growth Rate (CAGR) of 16.59%, which is impressive. However, it also experienced a significant maximum drawdown of -35.05%, indicating its vulnerability during market downturns. The high CAGR suggests robust growth, but the drawdown highlights the risk involved. While past performance is not a guarantee of future results, understanding these metrics can help set expectations. It may be beneficial to explore strategies that mitigate drawdowns, such as incorporating defensive assets or using stop-loss orders.

Projection Info

The Monte Carlo simulation, which ran 1,000 scenarios using historical data, predicts a wide range of potential outcomes. The median scenario suggests a significant 457.05% increase, while optimistic scenarios reach up to 706.7%. However, the 5th percentile indicates a 21.54% return, showing the uncertainty involved. While simulations provide a probabilistic view of future performance, they are not foolproof due to reliance on historical data which may not predict future market conditions. It's wise to use these projections as one of many tools in decision-making, rather than as definitive forecasts.

Asset classes Info

  • Stocks
    100%

The portfolio is overwhelmingly invested in stocks, accounting for over 99% of the allocation. This lack of diversification across asset classes could lead to increased volatility, as equities tend to be more sensitive to market fluctuations. While stocks can offer substantial returns, they also carry significant risks, especially in turbulent markets. To mitigate these risks, consider reallocating a portion of the portfolio to include bonds or alternative investments, which can provide stability and reduce overall portfolio risk.

Sectors Info

  • Technology
    28%
  • Financials
    15%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Industrials
    9%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Energy
    5%
  • Basic Materials
    3%
  • Utilities
    2%
  • Real Estate
    2%

The sector allocation shows a heavy concentration in technology at 28.39%, followed by financial services and consumer cyclicals. This concentration can lead to sector-specific risks, especially if certain sectors face downturns. A well-diversified sector allocation can help smooth out returns and reduce portfolio volatility. Consider balancing the sector exposure by increasing holdings in underrepresented sectors such as utilities or real estate, which tend to perform differently across economic cycles.

Regions Info

  • North America
    90%
  • Europe Developed
    4%
  • Asia Emerging
    2%
  • Japan
    2%
  • Asia Developed
    1%
  • Australasia
    1%

With 90.13% of the portfolio invested in North America, there's limited geographic diversification. This concentration exposes the portfolio to risks specific to the US market, such as economic downturns or policy changes. Geographic diversification can help mitigate these risks by spreading investments across different regions. Consider increasing exposure to international markets, which may offer growth opportunities and reduce reliance on the US economy. This can be achieved by investing in global or region-specific funds.

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 potentially be optimized using the Efficient Frontier, which aims to achieve the best possible risk-return ratio. This involves adjusting the weightings of the current assets to find an optimal balance. By doing so, the portfolio could potentially enhance returns for the same level of risk or reduce risk without sacrificing returns. It's important to note that this optimization focuses on the existing assets and does not necessarily imply diversification into new asset classes. Regularly revisiting this optimization can help maintain efficiency as market conditions change.

Dividends Info

  • Avantis® U.S. Small Cap Value ETF 1.10%
  • Vanguard S&P 500 ETF 1.20%
  • Vanguard Total International Stock Index Fund ETF Shares 1.60%
  • Weighted yield (per year) 1.23%

The portfolio's dividend yield stands at 1.23%, contributing modestly to total returns. While dividends provide a steady income stream, they are not the primary focus here. For those seeking higher income, consider increasing allocation to dividend-focused funds or stocks. This can enhance cash flow and provide a buffer during market downturns. However, it's essential to balance the pursuit of dividends with growth potential, ensuring the portfolio aligns with long-term investment goals.

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%

With a total expense ratio (TER) of 0.06%, this portfolio is cost-efficient, which is crucial for maximizing net returns. Lower costs mean more of your investment returns stay in your pocket. While the current costs are favorable, it's always prudent to review expense ratios periodically and consider lower-cost alternatives if available. Keeping costs low is a straightforward way to enhance long-term portfolio performance, especially when compounded over time.

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