Balanced Growth-Oriented Portfolio with Low Diversification and Moderate Risk Suitable for Long-Term Investors

Report created on Dec 4, 2024

Risk profile Info

5/7
Growth
Less risk More risk

Diversification profile Info

2/5
Low Diversity
Less diversification More diversification

Positions

The portfolio is composed of four ETFs, each contributing significantly to the overall allocation. With a focus on growth, the iShares Russell Top 200 Growth ETF and Invesco S&P MidCap Momentum ETF hold the largest shares, each at 28%. The Fidelity® High Dividend ETF and Vanguard S&P 500 ETF round out the portfolio with 24% and 20%, respectively. This composition suggests a growth-oriented strategy but lacks diversification across different asset classes, as it is predominantly invested in stocks. A more diversified approach could potentially reduce risk and enhance stability.

Growth Info

Historically, the portfolio has shown strong performance with a compound annual growth rate (CAGR) of 18.31%. However, it has also experienced a significant maximum drawdown of -35.1%, indicating high volatility. The returns have been concentrated over a short period, with 90% of gains occurring in just 37 days. This indicates that while the portfolio can deliver high returns, it is also susceptible to sudden downturns. To mitigate this, consider strategies that can provide more consistent returns over time.

Projection Info

Using a Monte Carlo simulation, the portfolio's future performance was projected with 1,000 simulations. The results show a wide range of potential outcomes, with the 5th percentile at 195.41% and the 67th percentile at 1,319.96%. The median outcome is 928.25%, reflecting a strong growth potential. The annualized return across all simulations is 19.63%, suggesting a positive outlook. However, the variability highlights the importance of preparing for different scenarios and considering risk management strategies.

Asset classes Info

  • Stocks
    100%

The portfolio is heavily weighted towards stocks, with 99.83% of the allocation in equities and a negligible amount in cash. This high concentration in a single asset class aligns with a growth-focused strategy but also increases exposure to market volatility. Diversifying into other asset classes, such as bonds or real estate, could provide a buffer against market fluctuations. This would help in achieving a more balanced risk-return profile and potentially improve the portfolio's resilience.

Sectors Info

  • Technology
    29%
  • Industrials
    14%
  • Financials
    13%
  • Consumer Discretionary
    12%
  • Health Care
    7%
  • Consumer Staples
    7%
  • Telecommunications
    6%
  • Energy
    5%
  • Real Estate
    3%
  • Utilities
    3%
  • Basic Materials
    1%

The sector allocation is concentrated, with technology making up 29% of the portfolio. Other significant sectors include industrials, financial services, and consumer cyclicals. While this concentration can drive growth during favorable market conditions, it also increases vulnerability to sector-specific downturns. A more diversified sector allocation could help mitigate these risks. Spreading investments across a broader range of industries can enhance stability and reduce the impact of negative sector-specific events on the portfolio.

Regions Info

  • North America
    70%
  • Europe Developed
    1%
  • Japan
    1%

Geographically, the portfolio is predominantly focused on North America, with 69.95% of assets allocated there. The remainder is sparsely distributed across Europe Developed, Japan, and Asia Developed. This heavy North American focus could limit exposure to growth opportunities in other regions. To enhance geographical diversification, consider allocating a portion of the portfolio to emerging markets or other international regions. This could provide access to different economic cycles and growth drivers, potentially boosting overall returns.

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 in terms of diversification. By moving along the efficient frontier, investors can adjust their risk-return profile. To achieve a riskier portfolio, one could increase the allocation to high-growth sectors or regions. Conversely, a more conservative approach would involve incorporating more defensive assets like bonds. It's crucial to align these adjustments with personal risk tolerance and investment goals, ensuring a balanced approach that suits individual preferences.

Dividends Info

  • Fidelity® High Dividend ETF 2.70%
  • iShares Russell Top 200 Growth ETF 0.50%
  • Vanguard S&P 500 ETF 1.20%
  • Invesco S&P MidCap Momentum ETF 0.30%
  • Weighted yield (per year) 1.11%

The portfolio's dividend yield stands at 1.11%, with the Fidelity® High Dividend ETF contributing the most at 2.7%. While dividends can provide a steady income stream, the overall yield is relatively low. For investors seeking higher income, it may be beneficial to explore additional dividend-focused investments. However, it's important to balance this with growth objectives, as high-yield investments may not offer the same capital appreciation potential as growth-oriented assets.

Ongoing product costs Info

  • Fidelity® High Dividend ETF 0.15%
  • iShares Russell Top 200 Growth ETF 0.20%
  • Vanguard S&P 500 ETF 0.03%
  • Invesco S&P MidCap Momentum ETF 0.34%
  • Weighted costs total (per year) 0.19%

The total expense ratio (TER) for the portfolio is 0.19%, which is relatively low and indicative of cost-efficient management. The Vanguard S&P 500 ETF, with an expense ratio of 0.03%, is particularly cost-effective. Keeping costs low is crucial for maximizing net returns over the long term. It's important to regularly review the expense ratios of the portfolio's holdings and consider lower-cost alternatives if available. This can help enhance overall performance and ensure more of the portfolio's returns are retained.

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